The Baltic innovation - Swedbank-ag

Hansabank is the biggest financial institution in the Baltic countries.
The keys to our success are our consistent vision, mission and values.
The Baltic
innovation
Innovation is one of our four key values. It is a philosphy that
connects the brightest and the cleverest minds in the Baltics.
That is why we call our innovation the Baltic innovation.
4
Hansabank Group in Brief
8
Swedbank Group in Brief
14
Statement by the Chairman of the Council
16
Statement by the CEO
22
Corporate Citizenship and Responsibility
28
Financial Review
40
Corporate Governance
43
Consolidated Financial Statements
44
Consolidated Income Statements
45
Consolidated Balance Sheets
46
Consolidated Statement of Cash Flows
47
Analysis of Cash and Cash Equivalents
48
Consolidated Statement of Changes in Equity
49
Notes to Consolidated Financial Statements
88
Independent Auditors’ Report
89
Recommendation of the Board for Distribution of Profit
90
Declaration of Management Board
91
Declaration of the Supervisory Council
92
AS Hansapank Supervisory Council
94
AS Hansapank Management Board
Mission
By understanding and acting on our customers’ needs we can offer them the most valu-
able fi nancial solutions, thus improving their everyday life. This way, we can continuously
increase our company’s value and play a positive part in society.
Vision
We want to be the leading financial institution in the Nordic and Baltic region. By lead-
ing we mean: the highest customer satisfaction; the most profi table in each market; the
most attractive employer in each geographic market.
Values
We believe that the Group’s strong performance and growing international recognition
is the result of a performance-oriented culture, transparent communication, willingness
to change and the high commitment of our employees. The Group values are: Result-
oriented – we want to achieve good results in everything we do; Open – we are transparent
and open in our communication; Innovative – we are learning and ready to change;
Committed – we are building a long-term sustainable business.
3
Hansabank
Group
in Brief
4
Earnings per share
in euros
1.52
1.02
0.76
0.61
0.41
2003 2004 2005 2006 2007
5
Strategy
GOAL
We want to be a clear leader in each Baltic market
• Biggest growth in volumes (in absolute terms).
• Highest profit (in absolute terms).
• Highest customer satisfaction.
HOW DO WE RUN OUR BUSINESS?
We operate in the Baltic countries. As a universal bank our business model is based
on a large customer base. New customer acquisition and retention is a key for us. In
customer relations, we value long-term partnerships. We offer professional service,
convenient access and all that for a competitive price.
yield of interest-earning assets, per cent
Lending annual growth, per cent Margins
loans, in billions of euros, December 31 spread, per cent
cost of interest-bearing liabilities, per cent
58 59
5.7 6.1
5.2 5.2
35 4.8
34
32 3.9
3.5 3.3
3.1
14.9 2.8
9.4 19.9
5.9 2.8
4.4 2.4
1.9 1.7 1.8
2003 2004 2005 2006 2007 2003 2004 2005 2006 2007
6
FINACIAL TARGETS
• Our focus must be on profitable growth. Hansabank is having the culture of high
performance and stretched goal setting.
• To be the dominant player measured by market share gives us the opportunity to
utilize the economies of scale, optimize our funding cost and cross sell products to
wide customer base. It is important to create value in every period and we are
measuring the performance against the following financial targets:
To increase the operating profit before taxes by 20%
Return on equity at least 20%
Cost-income ratio below 42%
Net loan losses below 0.35%*
*Target changed to P&L based ratio (provisions+write-offs – recoveries/ beginning of the year portfolio).
Market Position 2007
Estonia Latvia Lithuania
Retail deposits 1 1 1
Corporate deposits 1 4 2
Retail loans 1 1 1
Corporate loans 1 1 2
Pension II 1 1 1
Cards 1 1 1
Cost-income Return on equity
per cent per cent 29.0
26.0
25.6
49.2
48.6
45.8 46.0
22.8
41.0 20.8
2003 2004 2005 2006 2007 2003 2004 2005 2006 2007
Cost-income ratio and return on equity for periods before 2005 (2003-2004) have
not been adjusted for the change in loan fee calculation. In these charts, revenues
for 2003-2004 include 100% of loan fees for that period. Starting from 2005 loan
fees are amortised over the maturity of the loan contract.
7
Swedbank
Group
in Brief
8
Swedbank’s vision is to be the leading financial institution in the markets in which we
are present. Swedbank serves a total of around 9 million private customers and
500,000 corporate customers with 459 branches in Sweden, 299 branches in Estonia,
Latvia and Lithuania and 191 branches in Ukraine. The group also has operations in
Copenhagen, Helsinki, Kaliningrad, Luxembourg, Marbella, Moscow, New York, Oslo,
Shanghai, St. Petersburg and Tokyo.
9
SWEDISH BANKING Markets Sweden
Lending SEK 867bn
Through its 459 branches, ATMs and telephone and Internet Deposits SEK 308bn
banking services, as well as the cooperation with independent Income SEK 17,678m
savings banks and partly owned banks, Swedbank offers its Profit for the year SEK 6,182m
4.5 million Swedish customers unrivalled access to banking Private Customers 4.1
services. Swedish Banking has a complete range of financial Corporate Customers 395,000
services for consumers, businesses, organizations, munici-
Branches 459
palities and county councils. Swedbank is a leader in several
important market segments in Sweden.
BALTIC BANKING Markets Estonia, Latvia and Lithuania
Lending SEK 177bn
Baltic Banking comprises the group’s operations in Estonia, Deposits SEK 102bn
Latvia and Lithuania, with 5.2 million customers. Operations Income SEK 8,773m
are conducted under the Hansabank name. Through a com- Profit for the year SEK 4,322m
prehensive branch network and telephone and Internet Private Customers 5.0
bank, a complete range of products and banking services is Corporate Customers 219,000
offered to consumers and businesses. Hansabank is the Branches 299
market leader in the most important segments of the rapidly
growing Baltic markets.
INTERNATIONAL BANKING
International Banking comprises Swedbank’s growing inter-
national operations outside its home markets of Sweden Markets
Ukraine, Russia, Norway, Denmark,
and the Baltic countries. The long-term objective is to develop Finland,Spain, Luxembourg and Japan
at least Ukraine and Russia into geographical home markets. Lending SEK 34bn
Aside from Ukraine and Russia, the business area includes Deposits SEK 13bn
smaller operations in Luxembourg, Finland, Denmark and Income SEK 1,279m
Norway as well as the representative offices in Japan and Profit for the year SEK 268m
Ukraine. Private Customers 179,000
Corporate Customers 19,000
Branches 200
Income, by business area Profit for the year, by business area
Attributable to Shareholders of Swedbank AB
Asset Management Asset Management
Others and Insurance
and Insurance
Swedbank
Swedbank 7% 2% Markets 8%
Markets 8%
10 % International
Banking
International
Banking Swedish 2% Swedish
Banking Banking
4%
51 % 50 %
Baltic
Baltic Banking
Banking
32 %
26 %
2007 2007
10
SWEDBANK MARKETS Markets Sweden, Norway, USA and China
Lending SEK 24bn
Swedbank Markets is Swedbank’s investment bank, offer- Deposits SEK 27bn
ing equity, fixed income and currency trading; project, Income SEK 3,557m
export and business financing; and corporate finance Profit for the year SEK 1,010m
services. Outside Sweden, Swedbank Markets operates
through the subsidiaries First Securities in Norway and
Swedbank First Securities in the U.S., as well as the
branch offices in Oslo, New York and Shanghai.
ASSET MANAGEMENT AND INSURANCE Markets Sweden
Assets under management SEK 606bn
Asset Management and Insurance comprises the subsid- Income SEK 2,183m
iary Swedbank Robur, with operations in fund manage- Profit for the year SEK 975m
ment, institutional and discretionary asset management,
insurance and individual pension savings. Swedbank
Robur is Sweden’s largest fund manager. Products are
sold and distributed mainly by Swedish Banking and by
the savings banks and partly owned banks in Sweden.
SHARED SERVICES AND GROUP STAFFS Markets Sweden
Income SEK 2,749m
Shared Services and Group Staffs includes the development Profit for the year SEK –298m
and operation of IT systems in Sweden and other shared
service functions primarily in Sweden, although increas-
ingly also for other markets as the group’s international
presence grows. Treasury, Group Executive Management,
Group Staffs and the group’s insurance company, Sparia, are
included as well.
Lending, by business area Employees, by business area
Total 22,148 full-time employees
Swedbank Asset Management Shared Services
International
Markets and Insurance and Group Staffs
Banking
3% 2%
Swedbank 2% 7% Swedish
Baltic Markets
Banking
Banking 3%
28 %
16 % International
Banking
18 %
Swedish
Banking Baltic
79 % Banking
42 %
2007 2007
11
12
Innovation
means
opening doors
to unknown
places.
13
14
Statement by the Chairman of the Council
Swedbank is growing from being primarily a Swedish In Estonia, Latvia and Lithuania, we continue to generate
bank to an international banking group with Swedish more business from our customers. While the strong
roots. Through the acquisition of TAS-Kommerzbank in growth of recent years has led to economic imbalances,
Ukraine in 2007, we have secured a position in one of we remain optimistic that economic growth will exceed
the fastest growing banking markets in Eastern Europe. the EU average over the long term.
Swedbank’s vision is to be the leading financial institution In the Russian market, Swedbank currently has three
in the markets where we are present. Though Sweden is branches. After a temporary suspension due to an in-
our base, the Baltic countries account for a growing share vestigation by the central bank, we are back in business.
of the Group’s overall profit. What is currently a limited A reassessment of earlier strategies is under way to
presence in the emerging markets of Russia and Ukraine determine our future direction.
will come to represent a more significant share of our
earnings in the long term. Through TAS-Kommerzbank, we are now one of the 15
largest banks in Ukraine. The Ukrainian banking market is
Our customer offering is based on competitively priced still in its infancy, and our hope is to create a full-service
products and services that are easy to understand and universal bank.
use, combined with the market’s best service, regardless
of whether customers contact us through our branches, Through our presence in the rest of the Nordic region
online or by telephone. and Europe, North America, Japan and China, we have
a complete, international offering for our customers.
Greater
Growth adds
internationalization
shareholder value
The driving forces behind Swedbank’s expansion are an
increased internationalization and our efforts to sustain Growth is an important part of Swedbank’s strategy. To be
growth and secure long-term economies of scale. For our successful, growth must be managed carefully to ensure
customers, cross-border banking comes naturally. The efficiency, profitability and shareholder value. We are
expansion of our operations to new markets benefits them therefore working systematically to encourage decen-
as well as the bank. More customers can take advantage tralized decision-making while identifying and realizing
of the bank’s expertise and product portfolio. We ensure the economies of scale available to a large organization.
stable earnings today and continued profitability over We are keeping hierarchies to a minimum and sharing
time by dividing our operations between mature markets knowledge between the different parts of the company.
and growth markets. This is combined with strict demands on cost efficiency.
In 2007 we increased new business from customers in all
Market leader in our markets. We are optimistic going forward and are
convinced that we are correctly positioned to maintain the
broad-based segments highest customer satisfaction, stay the most profitable
and be the most attractive employer.
In Sweden, we are the market leader in broad-based seg-
ments. We want to make our customers happier by giving I would like to express my gratitude to the bank’s more than
them more value. Our goal is to grow in the insurance 21,000 employees for their fine efforts and the success we
market, where we anticipate new opportunities. We are achieved together in 2007!
Sweden’s largest bank for small businesses, but also see
the potential to gain a larger market among medium-sized
and large companies.
Jan Lidén
President and CEO
15
16
Statement by the CEO
2007 was another very successful year for the Hansabank The behaviour of Hansabank and other major banks in the
Group – it was the ninth consecutive year in which our region has a strong impact on the overall trends in the
business volumes showed strong growth, where new market. Since the second half of 2006 we have gradually
profit levels were reached and operating efficiency was become more conservative in our lending policies to limit
higher than ever before. At the same time, 2007 was also excessive growth in sectors that have seen the highest
different from our recent history as it marked a change growth and are related to domestic consumption (real-
in the economic cycle that has brought us new challenges. estate development, construction, retail/wholesale). Hansa-
bank has tightened its credit policy both for corporate as
well as retail loans through higher risk pricing in certain
Developments products and segments as well as higher requirements
for collateral or debt servicing capability. As a result of
in the environment the actions taken our portfolio growth slowed to 34% in
2007 which was in line with our targets for reaching more
The region has developed tremendously since the Baltic balanced and sustainable growth levels. Total market
countries entered the European Union in 2004. Most of us growth was at a slightly higher level of 39%.
had probably underestimated the effect this change has had
on our region. The economies have benefited from rising We have seen an increase in different risk ratios towards
confidence levels, low interest rates as well as a strong the end of the year, which reflect the overall developments
inflow of foreign capital. From mid-2006 it has become in our operating environment. We expect these trends to
clear that excessive growth is causing imbalances and continue in 2008 and our risk cost ratio will most likely rise
growth rates should be decreased. The Estonian and Lat- above our over the cycle average of 35bp. However, we are
vian economies peaked in 2005 and 2006 and Lithuania confident that our risk profile is sound and our risk cost will
experienced the same just at the very end of 2007. The remain below the targeted level in the medium-term.
rapid growth in the Baltics has been largely driven by do-
mestic consumption, financed by foreign borrowing and
the resulting imbalances threaten to be the short-term Business overview
challenge for the Baltics. The region has become a concern
in investors’ eyes and in 2007 the country ratings of all Despite the volatile and challenging market developments
three Baltic countries were revised due to the heightened we have closed another highly successful year exceeding
risk of a so-called “hard landing”. However, I would like to expectations. All targets were achieved by a solid margin.
stress that regardless of these short-term trends I am con- We benefited from rising base rates, which supported our
vinced that the long-term outlook for the Baltics remains net interest income. In addition, low credit losses allowed
positive. The fundamentals remain strong, penetration better than expected results to be reached. The second
rates are low and convergence levels compared to their half of the year was clearly more volatile than the first
EU peers are modest. with turbulent securities and debt markets. The effects can
be seen in our 4th quarter results, where trading income
There is a consensus among market participants that the was clearly below the annual average and the average
current growth rates are not sustainable, but there is no cost of funding increased considerably.
common view on the pace and extent of the adjustment.
The correction was already visible in Estonian macroeco- FINANCING
nomic indicators in first quarter of 2007 and the first
signs were also observed in Latvia. Hansabank has taken The key words in financing activities during the year 2007
into account the likely negative developments and made were sustainability and adjustment. With a detailed and
necessary preparations for operating in a more difficult systematic approach we have been able to gradually re-
economic environment. duce lending growth to more sustainable levels. At the
GDP growth 11.9
per cent 11.2
10.3 10.2 10.6 10.2
8.8
8.3 8.7 7.9 7.7
7.2 7.2 7.3 7.1
2.5 3.0 2.9
1.3 1.8
EST LAT LIT EU27 EST LAT LIT EU27 EST LAT LIT EU27 EST LAT LIT EU27 EST LAT LIT EU27
2003 2004 2005 2006 2007
17
same time we have managed to maintain our overall ment products and up-to-date and convenient communi-
market position and long-term client relationships. cation channels. Increasing international activity by local
customers and expansion into neighbouring markets has
The mortgage market was one of the focal points during increased the demand for cross-border banking solutions
the past year. In the first half of the year we raised several and regional coverage. Reliability, usability and integration
key requirements such as loan to value ratio and debt of e-channels into clients’ systems have become more im-
service capability to cool lending demand. In May, we also portant factors in selecting a bank.
introduced a special campaign to promote responsible
borrowing in order to be proactive and educate our clients The number of cards issued (both debit and credit) in-
about making sensible lending decisions. As a result of all creased 9% in 2007 and our clients in the Baltics hold
these actions our housing loan portfolio growth slowed more than 3.35 million cards. Payment turnover of cards
from 75% to 39% in 2007. A more conservative stance has we have issued grew 42 % annually with strong growth
also had its effect on our market shares - over the year, our rates in all three countries. Our clients are increasingly
market share in the Baltics decreased from 37% to 34%. more IT literate and the proportion of electronic payments
in total payments reached 98% in Estonia, 96% in Latvia,
Consumer finance volumes are relatively low in the Baltic and 96% in Lithuania by the end of 2007.
countries and even with high growth rates the portfolio is
amortising quickly. The product yield is high and our diver- RUSSIA
sified portfolio provides a very good risk and return re-
lationship. Although consumer finance had the highest In June 2007, the Central Bank of Russia (CBR) imposed
annual growth, 41% in 2007, the decrease in growth from operational restrictions on OAO Swedbank Russia. CBR
2006 was significant. We stopped active advertising of suggested that Swedbank may have violated federal laws
consumer finance products in 2007 and instead have and the normative acts of the CBR. The Group’s manage-
focused on more targeted offers to selected target groups. ment formed a team to work on the issues discovered
and in September CBR announced its decision to let Swed-
The growth of our corporate finance portfolio (lending bank resume full-scale operations in Russia. OAO Swed-
and leasing) came down to a more sustainable level of bank can proceed with executing its strategy to become a
32% in 2007. In the second half of 2006, we had already universal bank in the North-West of Russia.
started to set higher requirements for financing of early
development stage real estate. The policy was further The remaining part of the year was spent strengthening
tightened in 2007. At the end of 2007, 28% of our corpo- our internal capabilities and organization, revitalizing frozen
rate lending portfolio was related to the real estate sector. business and working out a new and adjusted universal
In absolute growth terms the share of real estate related banking strategy. After the two years of hard work, a major
lending remained stable in 2007 and was slightly down from win was achieved in our leasing tax dispute and part of our
2006. However, the growth differs by country. In Estonia and claimed VAT refund was returned to the bank. In addition
Latvia, the absolute growth slowed while in Lithuania where to the positive financial result it allows us to reopen our
real-estate lending penetration is much lower the growth leasing business. Despite the restrictions posed on the
accelerated during 2007. company, a portfolio growth of 50% was achieved in 2007.
We have successfully entered the mortgage market and
SAVING AND INVESTMENT PRODUCTS we keep expanding our network in Russia.
All banks in the Baltic countries actively promoted savings
and investment products during 2007 and the popularity of Our strategy
investing has increased significantly. In addition, economic
development and an increase in personal wealth have led to Hansabank Group’s overall strategy has remained focused
more interest in investing in general. The sale of new invest- on the same main aspects for several years. Every year
ment products (equity funds, real estate funds, structured we review the focus areas, adjusting and changing them
deposits) has been developing at a fast pace, especially dur- as needed, taking into account both developments in the
ing the first half of 2007 and we have been able to increase surrounding environment as well as the natural growth
our market share and widen client offerings. Towards the and changing of the organization over time.
end of 2007, volatile financial markets both globally and in
CEE put pressure on the performance of investment products We have been consistent in the strategy process and
and caused caution amongst investors. The total volume of enjoy the sense of familiarity that has been established
clients’ assets gathered amounted to EUR 2,6 bn at the end over the past three years. These processes are giving
of 2007 with an annual growth of 41%. valuable results and have become very central to our or-
ganisation. The economic environment of 2007 has guided
SETTLEMENTS us to scrutinize the development scenarios further in the
light of the economic cycle, a slowing convergence process
Our strong position in settlements was further increased as well as a maturing lending market. A more volatile busi-
in 2007. We are the largest settlement bank in all three ness environment going forward will bring new challenges
Baltic markets, offering our clients a wide range of settle- but also new opportunities.
18
We have highlighted the most important activities that Operational excellence – increase operational effec-
ensure the achievement of our objectives. These activities tiveness. We want to be more efficient in our operations.
form the cornerstone of our strategic development. Improving the speed and quality of our processes will result
in higher customer and employee satisfaction. We need
• We set ourselves stretched targets and follow through to move from one-time process improvement efforts to a
with dedicated execution. We regularly assess our per- change of mindsets.
formance and communicate the evaluation of the results
clearly. Business intelligence – further build our capabilities to
• We offer high-quality products with accessible, proactive work with data. Building our capabilities to work with client
and uncomplicated service. data and competence to use it enables us to enhance our
• We want to provide our customers with the widest distri- offers to the customers, as well as run our business smarter.
bution network regardless of their preferred channel.
• We want to excel in our capabilities to analyse and model People challenge – invest in leadership development
customer data. By building capabilities to work with this and improve employee productivity. High business growth,
information we are able to enhance our offers to the cus- several new group-wide strategic initiatives and a tight la-
tomers as well as run our business in a smarter way. bour market have impacted on employee productivity. In
• We want to be perceived as a credit specialist with addition, growing scale, complexity and cross-border activi-
strong expertise and wide client offerings. We continu- ties cause higher demands on our managers’ capabilities.
ously develop our credit skills to achieve a better risk-
return ratio than the market in general. Corporate banking – manage corporate business
• In recruitment, we want to be the first choice for talent. through the cycle. Our goal is to be acknowledged as the
We look for people who fit with our value-set. first choice partner for local and pan-Baltic corporate
• We make decisions close to the customer - business customers and the natural first choice as the regional bank
responsibility is with the people servicing the customer. for multinational companies in the Baltics.
By having a lean organisational structure we reduce
complexity and provide clear responsibility and authority. Retail lending – better credit selection and risk-based
pricing. The retail credit portfolio has been one of the key
During 2007 we have moved forward strongly in a number growth drivers during the recent years. However, as debt
of areas building a more sound and lasting business foun- penetration grows and economic volatility increases it is
dation. In the IT area we revised the structure of the gover- increasingly important to improve our credit selection skills.
nance and decision-making processes. Our business intelli-
gence initiative has added structure and increased our Daily banking – strengthen our client offer. Daily banking is
capabilities for working with valuable client data. We have at the centre of our interaction with clients. Moving towards
prepared the design for the Pan-Baltic mass-market product combining separate services and developing a unified client
harmonisation and its future development. The operational offer will form the core of our client relationship.
excellence initiative was launched to build capabilities and
run the first pilots to rationalise our business processes. Investment management – build regional business model.
These initiatives will be the core for further development With strong economic growth and an increase in wealth,
of our company – to face the competition of the matured the demand for investment products is increasing rapidly.
markets, to develop and deliver new offerings to our clients, We want to develop our excellent advisory capabilities in
and to reach our primary long-term goal. all channels into our main competitive advantage, supported
by pan-Baltic leveraged leading product expertise.
Priorities for 2008 Today we are in the middle of a change in the economic
cycle. The developments so far have mostly met our
In 2008, the following eight areas are in focus: expectations but worsening international capital markets
can and probably will negatively influence our business
Build a new organisation model in Baltic banking. region. These are challenging times when true client
Hansabank has built strong local businesses in all three relationships are formed and maintained. This is also the
countries. We want to move further and go after cross- time when Hansabank can leverage from the investments
border business synergies. Our goal is to build a regional made into organizational development and demonstrate
banking organisation which leverages on cross-border its internal strength and quality.
capabilities and which has a value larger than the asso-
ciated increase in complexity.
Erkki Raasuke
CEO of Hansabank
19
20
20
Innovation
means
breaking out
of the box.
21
Corporate
Citizenship
and
Responsibility
We believe in long-term partnerships and feel that only by giving
due attention to all stakeholders – our clients, employees, the
mother bank and its shareholders, our partners from different
fields and the community we work and live in – will we be able to
sustain today’s success in the future.
22
In 2007, Hansabank’s managers continuously dedicated towards the advancement of society. We have consciously
a high level of attention to our own employees and talent readjusted our focus to offset classic sponsorship, the
management. The bank also continued with its support main goal of which is brand visibility, against social devel-
policies that aim to maintain and enhance a good balance opment projects, which are designed to solve problems
between sports, culture and social issues, and to build that are of the biggest importance to Estonian society as
and develop strategic partnerships in order to carry out a whole.
socially influential initiatives.
In the field of education our biggest proportion of finan-
cial and employees’ voluntary help was invested in the
Thinking and acting as Youth to School (Teach First in UK and USA) project, which
is designed to reduce educational inequality among
a responsible corporate schools, alleviate the shortage of teachers and improve
the profession’s reputation by bringing the best university
citizen graduates to teach in the ordinary schools of Estonia. The
recruitment campaign that was held in spring 2007 result-
“Doing well by doing good” has become a fashionable ed in 76 applications received for 11 teachers’ position. The
mantra for businesses all around the world. Over the whole chosen candidates received training at the University of
Swedbank Group, corporate social responsibility (CSR) is Tallinn during the summer, and were beginning the first
defined as the bank’s responsibility for the impact of its year of their two-year programme in autumn 2007. A new
decisions and activities on society and on the environment, recruitment drive to find young teachers for 2008 has
through transparent and ethical behaviour that: already been launched, with competition set to be just as
fierce.
• Is consistent with sustainable development and the
welfare of society; In addition to the success of Youth to School, autumn
• Takes into account stakeholders’ expectations; 2007 marked the launch of another large-scale project –
• Complies with current legislation and is consistent with the University of Tartu IT professorship. Hansabank,
international standards and practice; together with Swedbank, is supporting the project with the
• Is integrated into all of Swedbank’s operations. aim of training globally competitive software specialists
for all the Baltic States.
Hansabank has always felt privileged to share its success
with the community in which we live and work. We under- Our investments in health have been in areas where our
stand and believe that with reach and power comes re- support is designed to enhance the state’s efforts in re-
sponsibility – a licence to operate. Therefore, we do our solving the most acute problems. Estonia is known, re-
best to contribute to the positive developments and trends grettably, for its growing number of HIV-positive people.
in the region. Hansabank shows its concern and care for According to the figures of the National Institute for
the community in many different ways – by serving our Health Development (NIHD), a sub-office of the Estonian
clients with the highest professionalism and care; by hon- Ministry of Social Affairs, more than 1% of the population
ouring and maintaining an open and transparent business is now HIV-positive, which means that the virus is being
culture; by taking very good care of our own employees; spread more and more among perfectly ordinary people.
and by supporting different initiatives in the fields of sport, Against the backdrop of these sobering statistics, Hansa-
culture, education and society. Our intention during 2008 bank decided to take concrete steps to inform both its
is to implement CSR issues further into the bank’s strategy staff and the public of the threat of HIV. In 2007, we or-
and policies. In order to better achieve that, Hansabank ganised HIV-related courses for employees which resulted
Estonia has hired a full-time CSR manager. Special people in 800 voluntary participants. At the end of the year we
responsible for CSR issues were also appointed in Latvia organised a social campaign in association with NIHD and
and Lithuania. We will monitor and report the results in MTV in which singers, popular among teenagers, encour-
four large areas – workplace, marketplace, community and aged people to get tested. We also made testing available
environment. to the staff working in our main buildings. More than 200
people chose to take an anonymous HIV test.
In 2007, the country organisations of the Hansabank
Group spent up to EUR 7 mln on different sponsorship
and CSR projects. Below, there’s a short overview of One of the biggest social projects we have launched in the
highlights from 2007 as well as plans for 2008 field of sports is also related to health: Estonian Health
Tracks is designed to provide year-round exercise possi-
bilities on tracks and trails in the Estonian countryside.
Estonia For now, 17 such tracks in different parts of Estonia have
received new covering, lighting, track machinery and
HIGHLIGHTS FROM 2007 equipment for the production of artificial snow. Estonian
Health Tracks played host to a record attempt on 25 Feb-
In Hansabank Estonia’s sponsorship and CSR budget in ruary 2007 designed to measure the distance covered by
2007 the largest growth compared to 2006 was directed all of the people exercising on that day. 7756 skiers and
23
other sports enthusiasts registered their contributions, same as for our banks in Estonia and Lithuania - sports,
with the total recorded distance covered on skis amount- culture, education, and social projects. In sports, the bank
ing to 81,051.3 kilometres – the equivalent of twice supports mainly top-level athletes – national teams as well
around the Earth. as the Olympic team. There are also several regional pro-
jects of national importance. As for culture, the key words
In culture our focus was a partnership with Kumu, the are contemporary, high quality, and creativeness. In edu-
Art Museum of Estonia, of which Hansabank became the cation, professional as well as academic growth are en-
main sponsor at the beginning of 2007. With the bank’s hanced and supported.
support Kumu was able to present two major exhibitions,
one of Estonian classic Henn Roode and the other of In 2007, one of the highlights of Hansabanka support
Catalonian master Joan Miró. The Miró exhibition is con- activities was the the Anniversary Celebrations of the
sidered one of the key cultural events in Estonia in 2007, Cities – the bank supported anniversary celebrations for
and one which we wanted to be able to share with as 24 major cities and towns of Latvia. In addition long-term
many people around the country as possible. So Hansa- cooperation with the New Riga Theatre continued – the
bank organised a charity campaign at the end of the year theatre is rather successful with new, well-appreciated
with the aim of bringing special-needs children from the productions, prizes and awards gained in competitions in
farthest corners of Estonia to Kumu. Latvia. With the help of Hansabanka, the theatre was
able to give different performances in 10 Latvian cities.
In our support of social development and civic society we
have continued with the Let the Stars Shine project, which Another long-term partnership for Hansabanka is the one
funds children’s and youth initiatives, and in which we pro- with the Latvian National Opera which was successfully
vide almost 65,000 euros twice a year for the launch of continued in 2007 as well. The bank also supports the
programmes promoting young people’s lives. In 2007 Han- Kremerata Baltica orchestra. According to the words of
sabank launched the Million rain (Miljonisadu) programme Maris Avotins, Head of Hansabanka: “High professionalism
for active bank clients who were able to vote for a range and a desire to achieve the best results at anything we do
of non-profit organizations. The bank’s support was divided are the values the bank shares with Kremerata Baltica.
in accordance with the votes given and by the end of the Music is the best investment in the future because excellent
year 2007 Hansabank donated almost 110,000 euros to 16 musical values are unveiled as the time goes by.”
organisations involved in very different fields (cancer pre-
vention; environmental protection; support of the elderly, In sports, the highlights of 2007 included the windsurfing
young, children with disabilities, etc). competition Hansabanka Cup – Regatta Riga. In basket-
ball, which is another priority support area for Hansa-
PLANS FOR 2008 banka, several important events took place – the Euro-
basket 2007 competition, a meeting of Hansabanka
In 2008 we will continuously focus our support activities on executive management with national basketball teams
the four main areas: sports, education, culture and society. at the headquarters of the bank, an exclusive calendar of
Our primary focus in each field will be as follows: sport – the Latvian National Women Basketball Team produced
skiing; education – Youth to School project; culture – co- for charity purposes, an installation of 24 streetball bas-
operation with Kumu, plus closer co-operation also with kets, regional basketball championships, a wheelchair
Estonian Concert in presenting Saaremaa Opera Days; and baskeball contest, and more.
society – HIV prevention in association with the state and
the coalition of Estonian companies against HIV established In education, support was provided for 15 Latvian univer-
in 2007, one of whose founding members was also Hansa- sities. The bank also supports academic growth via the
bank. scholarship competition Open Mind. Teacher First, the
project similar to the Estonian Youth to School, was also
We are also contributing to social development and to launched in 2007 and Hansabanka aims to strongly con-
changes in people’s attitudes and behaviour with the new tinue in this direction in 2008.
charity section on our new Internet bank where donating
is going to be made as simple as possible. Our partner in
the majority of these social initiatives and philanthropic PLANS FOR 2008
projects is Estonia’s most well-known non-profit organi-
sation - the Good Deeds Foundation, with whom we are Priority areas and directions for the bank will continue to
looking to promote social enterprises and society’s problem- be basketball, hockey, the Olympic movement and support
solving through the most innovative ideas. for the Latvian Olympic Committee. In the cultural sphere,
the bank will continue its existing long-term partnerships
with the Latvian National Opera, the New Riga theatre and
Latvia Kremerata Baltica. Contemporary art will be another focus.
In education, the Teacher First project will be continued as
HIGHLIGHTS FROM 2007 well as the awards for regional teachers. Similar to 2007,
several cultural projects and events are planned for Russian
The key support areas for Hansabanka are largely the audiences in 2008 as well.
24
national investment conference organised by Hansabankas
Lithuania was granted to “Encurage the Future” and „Lithuanian Junior
Achievement“ in order to initiate financial education projects
HIGHLIGHTS FROM 2007 to the schoolchildren.
Similar to Estonia and Latvia, Hansabankas is one of the In 2007, Hansabankas signed a cooperation agreement
biggest companies and most well-known brands in Lithua- with the National Student Academy (NSA) and became
nia, therefore carrying the responsibility of being regarded the general sponsor of the organisation. The main objec-
as a role model in business and society. The expectations of tive of the NSA is to enhance the intellectual potential of
the stakeholders are high and in order to meet them through Lithuania investing in gifted and motivated schoolchildren,
the years Hansabankas has demonstrated consistent and providing them with additional opportunities to improve
enduring commitment to society by not only being a re- their knowledge in different subjects and to develop their
sponsible player in the banking business, but also being an personality. Hansabankas, as a general sponsor of this or-
attractive employer and active participant in social issues. ganisation also committed to provide intellectual support
– the bank’s employees delivered lectures during the annual
We believe that people’s ability to make informed and re- sessions of the NSA.
sponsible financial decisions has a great impact on individual
achievements and welfare and thus on the economy of the Significant attention has been devoted to training and edu-
country. Therefore in 2007 Hansabankas has further cation of Hansabankas employees too. In its pursuit to en-
strengthened its efforts to provide financial education to hance the business and consulting skils of the employees, in
not only Hansabankas clients, but also the wider public in 2007 the bank has been implementing EU co-funded project
Lithuania. for employees, who are working with small and medium
enterprises.
Starting with the newly launched programme for young
clients called ZOOM, which is a great example of integrating Several other successful long-term initiatives were continued.
social responsibility into banking services, Hansabankas be- The bank’s traditional money-box contest for children
came the first in Lithuanian the market to offer such specia- celebrated its 10th anniversary in 2007. The annual contest
lised services for young people and thus embarks on an im- has a different theme each year and this time it was aimed
portant educational mission: to teach young people about at increasing ecological awareness of children.
their finances and develop responsible attitudes towards
money. Moreover, in order to provide clients with first-hand The Green City project was also successfully continued for
knowledge about investments and savings, Hansabankas the 3rd consecutive year. More than 3000 trees, bushes
organised a series of events: a conference with high-ranked and flowers were planted by Hansabankas employees in
international experts, a so called “Investment day” exhibi- more than 20 cities of Lithuania. The Green City project
tion providing all relevant information in one place and con- also inspired another significant initiative – planting of the
centrated manner, etc. The bank also created a new format Avenue of Professors in the territory of the biggest hospital
of events – Investment week - to deliver current information in Lithuania – Santariskes Clinics.
about investments and savings to smaller cities and towns,
where usually access to such information is limited. At the end of 2006, Hansabankas joined Global Compact
and has since been actively participating in the activities
Hansabankas has successfully continued its flagship project of the local network in Lithuania. As one of the active
– National Awards of Advancement – that honors people, members of the Global Compact network, Hansabankas
whose ideas, discoveries and original solutions inspired de- started to chair the network in Lithuania at the end of
velopment in Lithuania. The works nominated for award are 2007 for the half year period. The bank considers it both
assessed by the the Committee consisting of key figures in a great honour and commitment to contribute to CSR
science, business and culture. In 2007 the Award gained development in Lithuania.
even more appreciation and publicity in society in Lithuania
and awards were granted for Lithuanian language research,
development of world-class laser products and education of PLANS FOR 2008
Lithuanian youth in opera singing.
During 2007 we have brainstormed ways to strengthen
When engaging in sponsorship projects, Hansabankas gives CSR further. In 2008 Hansabankas will undertake the
priority to educational initiatives. The bank has been for the challenge of putting these ideas into action, firstly by
third year in turn participating in the project involving school- raising general awareness among employees about CSR
children “Encourage the future”. The main purpose of the and its importance and then, planning internal and external
project is to strengthen the motivation of the youth of actions. Moreover, during 2008, Hansabankas will keep on
Lithuania by encouraging them to achieve their goals. In co- focusing its efforts on education and plans to launch a new
operation with the organisation „Lithuanian Junior Achieve- project involving university students. Together with other
ment“ we have been implementing several projects for the Swedbank colleagues we are also looking forward to jointly
promotion of entrepreneurship and economic education starting a new project against bullying in schools with the
among the youth. In 2007, the fee collected from the inter- Save the Children organisation.
25
26
Innovation
means
being ahead
of your time.
27
Financial
Review
In 2007 Hansabank Group once again had a successful year: the
Group’s net profit increased by 49% to 484 million euros, and
EVA result increased by 43% to 320 million euros.
28
The focal points of 2007 are highlighted below: • Operating profit before taxes increased by 52% to 536
million euros during 2007
• Changing economic cycle. After two years of very high • Return on total equity was 29%
credit growth fueled by the European Union accession, • The cost-income ratio was reduced from 46% to 41%
low interest rates and better access to foreign funding, during 2007
the risk of overheating became increasingly apparent in • Net credit losses amounted to 0.21%
the Baltic economies. Careful selection of industries
financed and tightened credit policies brought down the Operating profit* growth
lending growth from 59% in 2006 to 34% in 2007. per cent *before taxes
Though asset quality remained solid throughout 2007, 54 52
a slow-down in the real estate sector cautioned us to
reassess the debt servicing capabilities of some of our 42
real estate clients. Credit policies have been tightened
and proactive measures reinforced.
23
• Efficiency and cost growth. With stabilizing growth 20 target
15
rates, efficiency improvement and managed cost growth 15
have been increasingly in focus. We have been re-assess-
ing resource requirements and our Baltic employee
growth declined considerably during the second half of
2003 2004 2005 2006 2007
2007: 1,014 people were hired during the first six months
and only 111 (66 in Russia) during the second half of the
year. Improving and streamlining our processes with an
operational excellence program helps to build a lean or- ROE
ganization that can adjust to the changes. per cent
29
• Turmoil in the world financial markets. The second 26 25 26
half of 2007 brought high volatility and squeezed liquidity
21
on financial markets. The turbulence has affected avail- 20 target
ability and cost of funding. Our cost of foreign funding
jumped to 4.73% in the fourth quarter compared to
4.11% six months earlier. In addition there has been an
effect on our trading and asset management activities
in the form of fair value revaluation losses on our asset
management and proprietary trading portfolio. Hansa-
bank’s own trading activities are relatively small so the
2003 2004 2005 2006 2007
negative impact was below 5 million euros.
• Developments in Russia. The overall Group, and Russian
business unit’s results in 2007 were affected by the growth Cost-income ratio
and operational restrictions imposed by the Central Bank per cent
of Russia (CBR). On June 6, CBR decided to restrict our 49 49
46 46
Russian operations for a period of three months. CBR 45 41
42 target
suggested that Swedbank OAO may have violated federal
laws and the normative acts of the CBR. The sanctions
were lifted in September allowing operations in Russia
to resume at full scale. On the positive side, several court
hearings were won regarding ongoing litigation con-
cerning VAT treatment in the leasing business. In the
fourth quarter, after the reimbursement from tax au-
thorities, the operational risk provision was reversed in 2003 2004 2005 2006 2007
the amount of 6.4 million euros.
Hansabank upgraded some of its medium-term financial
targets starting from 2007. The group is targeting an in-
crease in pre-tax profit by at least 20% annually. The
cost-income ratio target is 42%, ROE target 20% and
net credit losses target is 0.35%. The Group achieved all
its medium-term financial targets in 2007.
29
Revenue distribution by business units
Changes in Reporting
Russia 5%
Principles
Lithuania 26%
There were the following changes to reporting principles Estonia 39%
from the beginning of 2007.
ALLOCATION AND COST OF EQUITY
Latvia 30%
Hansabank Group is using the following Tier I capitaliza- 2007
tion and cost of equity levels.
Net interest income grew by 47% to 663 million euros.
per cent 2006 2007
The growth was especially strong during the first half of
Baltic units Russia Baltic units Russia
2007 as both growing volumes and rising base rates con-
Cost of equity 8 8 10 11
tributed to the increase. Towards the end of the year our
Tier I capital* 8 11 8 11
portfolio growth declined while the cost of funding expe-
* % of business unit’s risk-weighted assets
rienced a notable increase.
The shift in our liability structure towards more expensive
NUMBER OF EMPLOYEES
external funding intensified in 2007 as deposit growth
was significantly below lending growth. Higher average
In the second quarter of 2007, Hansabank unified the
cost of external funding (4.33%) compared to average
principles of accounting for trainees and interns in the
cost of deposits (2.27%) accelerates the interest expense
group. Historical employee numbers have been adjusted
growth. Also, a large part of our liabilities (external fund-
to comply with the unified rules.
ing and time deposits) is sensitive to base rate movements,
which has been pushing up the total cost of liabilities over
Review of the year.
Income Statement Client margins on the lending side continued to decrease
in 2007, however the margin pressure eased slightly.
Base rate (primarily the 6-month Euribor) increase par-
REVENUES
tially offset the margin decline since Hansabank Group
has more Euribor and USD Libor rate sensitive assets
Total revenues increased by 41% to 1,003 million euros
than liabilities. The annual average 6-month Euribor rate
in 2007. Strong growth of net interest income was the
increased from 3.23% to 4.35% in 2007. Total deposit
major growth driver, though good performance was ob-
margins improved notably in all three Baltic business units
served in all core items.
throughout the year.
Net interest margin
CLIENT MARGINS
per cent Net interest margin 6-month Euribor
per cent 2005 2006 2007
4.4
Deposits
3.7 HBG total 0.84 1.53 2.47
Estonia 0.61 1.25 1.72
3.3 3.2
Latvia 1.22 2.19 3.57
3.0
Lithuania 0.90 1.47 2.68
2.9 3.0
2.3 2.2 Loans
2.2 HBG total 2.81 2.52 2.42
2003 2004 2005 2006 2007 Estonia 3.00 2.65 2.63
Latvia 2.62 2.31 2.23
Lithuania 2.11 1.89 1.80
Net fee income rose by 23% to 203 million euros in 2007.
Three major revenue groups can be presented among the
fee revenues. Payment-related fees amounted to 59%, in-
vestment & trading related fees 20% and lending-related
fees 12% of the total fee revenues in 2007. Remaining fees
accounted for 9% of the total fee revenues.
30
Payment-related fees grew 21% in 2007. Strong growth OPERATING EXPENSES
rates can be seen both in card payments as well as trans-
fers as customers change from cash payments to more Operating expenses increased by 24% compared to 2006,
convenient electronic transactions. Turnover of card totaling 406 million euros in 2007.
payments grew by 42% during 2007 while the number of
cards increased by 9% over the year to 3.4 million with The 2006 results of the Group were reduced by a 16.2
particularly strong growth in Latvia. million euro operating risk provision in our Russian unit
due to ongoing litigation concerning VAT treatment in the
Investment & trading related fees include fees from bro- leasing business. In 2007, Hansabank won several court
kerage & investment services together with custody. Fee hearings and consequently decreased the provision for
income from these areas grew the fastest - by 53% to 55 VAT by 6.4 million euros. Operating expenses’ growth in
million euros during 2007. Asset management and pension 2007, without the VAT provision effect, was 32%. Cost-
savings products continue to develop at a rapid pace. The income ratio amounted to 41% in 2007, which is better
Group’s total assets gathered amounted to 2.63 billion, than the revised mid-term target of 42%.
growing by 41% over the past year with especially strong
growth in Lithuania 71% yoy. The largest cost item for the Group is personnel expense
which forms 57% of all operating expenses. In 2007,
Lending-related fees increased by 27% during the year personnel costs increased by 35% compared to 2006
to 32 million euros. and amounted to 232 million euros. Growth in employee
numbers, increases in both average salary and Group’s
Trading income increased by 33% compared to 2006. In strong financial performance related bonus reserve were
the first half of 2007 there was a healthy growth in the all driving personnel growth. Hansabank has been invest-
bank’s trading income: the increase was strong in both ing in organization and distribution capabilities both in
clients’ activities as well as in trading with proprietary 2006 and 2007. The number of employees increased by
securities. Negative trends in the stock market in the sec- 1,125 people to 9,574 during the year. Recruiting was lim-
ond half of 2007 led to decreased activity and fair value ited in the second half of 2007 as the economy presented
revaluation of our portfolio. Nevertheless, for the full year signs of cooling. Falling unemployment levels and increase
trading reported very good results. Of the main sub-items, in average salary have been influencing our personnel
income from client margins increased by 37% and income expenses in all business units. In Hansabank, the average
from proprietary securities trading increased by 85%. salary per employee grew 13% in 2007. The employee
Hansabank’s own trading activities are relatively small performance pay reserve grew by 45% over the year.
and the bank earns most of its trading income (68%)
from client margins. Number of employees*
*full time equivalent
Income from insurance operations increased 115% and 9,574
amounted to 23 million euros in 2007. In late 2006 we es-
8,449
tablished non-life insurance business in Estonia. The first
7,219
full year of operations was a success story – Hansabank’s
6,213
non-life insurance business won 10% market share in Estonia 5,771
in one year. The performance in the life-insurance business
was also very good in 2007. The number of life insurance
customers increased by 39 thousand and the volume of
premiums doubled compared to 2006.
Revenues and expenses
in millions of euros Revenues Expenses Cost-income, per cent 2003 2004 2005 2006 2007
49 49 Other expenses (except personnel) grew 11% in 2007. The
46 46 growth of administration expenses was the fastest in this
41 group at 32% compared to 2006. Expanding the office
and branch network drove the growth of rental expenses.
1,003 Professional services increased by 44% over the year.
Ongoing strategic projects in the areas of operational ex-
713 cellence and preparation for Basel II were the main reasons
behind higher costs.
498
421 406
359 328
242 ASSET QUALITY
183 201
The Group’s asset quality remained solid. Hansabank has
2003 2004 2005 2006 2007 set its target net loan losses to beginning of the year
portfolio ratio at 0.35% that in our opinion reflects the
31
reasonable average over the economic cycle. As antici- smarter pricing decisions. Our portfolios grew 25% in Es-
pated, during the second half of 2007 and especially in tonia and 34% in Latvia in 2007. For the Lithuanian busi-
the fourth quarter our net loan losses increased, reaching ness unit, 2007 was a year of continuous strong growth of
62 million euros for 2007. The economic slowdown and 46% yoy. Russian growth was hampered by the audit of
stagnation period in the real estate sector have lead us CBR during the second and third quarter of 2007. Despite
to further scrutinize the debt servicing capability of our the restrictions, 50% portfolio growth was achieved.
real estate sector clients. At the end of 2007 non-per-
forming loans, i.e. loans that are overdue by more than Loan growth by business units
60 days, formed 0.68% of total loans (based on internal in millions of euros
risk measurement principles the Group uses 12-month old 25% 34% 46% 50% Growth
portfolio volume for calculating this ratio since it gives a
7,533
more adequate picture of the portfolio’s quality). A year
earlier the ratio was 0.44%. Net loan losses formed 6,027 5,877
0.41% of beginning of the year portfolio in 2007 (0.35% 5,367
in 2006). 4,451
3,680
Asset quality
per cent of total loans Non-performing loans / 12-month old portfolio
1,072
Net loan losses / beginning of the year portfolio 716
0.9
2006 2007 2006 2007 2006 2007 2006 2007
Estonia Latvia Lithuania Russia
0.7
0.5 Loans to private individuals grew by 39% in 2007. Our
0.4 0.4 0.4 mortgage portfolio grew by 39% to 6.6 billion euros in
2007 with the fastest growth in Lithuania (+53%) and
0.4 0.4 Latvia (+39%). 2007 was a passive growth year for con-
0.3 0.3 sumer finance. After it became evident that measures
2003 2004 2005 2006 2007 need to be taken to limit loan growth, we withdrew above
the line marketing of our consumer finance products. The
growth was still strong at 41% given the lower market
penetration.
Review of the The growth of our corporate financing (lending + leasing)
portfolio was 32% in 2007. Higher internal requirements
Balance Sheet for real estate lending slowed this sector portfolio growth
from 90% in 2006 to the level of our overall portfolio growth
Hansabank Group’s total assets grew by 33% to 25.83 at 35%. The share of real estate lending in our corporate
billion euros in 2007. The share of loans to total assets portfolio has remained stable from 2006 to 2007 at 27%.
was stable at 77% over the year. Credit growth continues Other core sectors such as industry (29% yoy) and other
to outpace that of savings and the loans to deposits ratio business services, such as security, maintenance, advisory
increased from 159% to 183% by the end of 2007. The (59% yoy) showed healthy growth.
Group has been increasingly relying on funding from the
parent company to finance lending growth. The balance of At the end of December 2007, the Group’s total lending
dues to other banks and issued debt securities increased (bank lending, leasing and factoring) market share was
by 53% over the year from 7.7 billion euros to 11.9 billion 44% in Estonia, 23% in Latvia and 21% in Lithuania versus
euros. 47%, 25% and 20% respectively in 2006.
LENDING DEPOSITS AND SAVINGS
After two years of very high growth rates, the focus in 2007 was another year in which we saw a very strong
2007 was on more balanced and sustainable growth levels growth in the “alternative” savings market. Deposits are
in order to help the cooling of the Estonian and Latvian still the main method of saving, but other savings products
economies. Our lending portfolio increased 34% yoy. In are becoming increasingly popular. Customer deposit
absolute terms, the credit portfolio increased by 5.07 bil- growth was 17% or 1.58 billion euros in 2007. At the
lion euros to 19.95 billion euros (repos excluded). same time, assets gathered increased by 41% or 0.77
billion euros. In addition, the volume of investment de-
Our market position in Estonia and Latvia is well estab- posits grew to EUR 413 million, which is growth of 256%
lished. Managed lending growth in these countries directed from last year. Pension savings continue to grow and at
our focus to more thorough customer selection and the end of 2007 over 2.4 million people had already
32
joined the individual pension system launched in the Our solid performance was recognized and at the Invest-
Baltics in 2002. Our market leader position was even ments and Pensions Europe Awards event, Hansa Pension
strengthened this year by an increase in market share Fund K3 was awarded the Best European Pension Fund in
in Estonia to 55%, Latvia 54% and Lithuania 43%. fixed income investments. By the end of the year the share
of active clients with investment products (including in-
In addition, 2007 was a year in which the popularity of vestment deposit) reached 15% in Estonia, 8% in Latvia
investing increased significantly. Targeted marketing and 21% in Lithuania.
campaigns, investment conferences and training for our
clients resulted in a substantial increase in the number
of clients with investment and life insurance products.
33
Results by Business Units: Estonia
in millions of euros 2007 2006 Change
Total income 397.3 304.5 31%
Operating expenses 149.5 118.1 27%
Operating profit before provisions 247.8 186.4 33%
Net profit 225.3 175.9 28%
EVA** 163.5 140.8 16%
Return on allocated equity* 36.9% 40.8%
Cost-income ratio 37.6% 38.8%
Net loan losses*** 0.39% 0.28%
Net interest margin 2.72% 2.53%
Loans**** 7,532.8 6,032.4 25%
Deposits 4,719.6 4,096.2 15%
Allocated equity* 667.4 540.7 23%
Assets 10,336.9 8,104.0 28%
Number of employees (full-time equivalent) 3,246 2,940 10%
* Cost of equity used for EVA calculation was 8% in 2006 and 10% in 2007
** based on 8% capital adequacy for 2006 and 2007
*** net loan losses equals to (provisions+write-offs – recoveries) / beginning of the year loan portfolio
**** Loans to customers (excluding repos)
The Estonian business unit had another solid year of has established itself as an important market player win-
performance. Being the market leader in Estonia, the ning 10% market share by the end of 2007.
bank has played a vital role in balancing loan growth.
Strengthening the organization internally and building Our deposit base has been stable with annual growth of
sound business intelligence capabilities has enabled 15%. Estonia continues to lead in the offering of alterna-
better understanding of customer behavior and related tive savings and investment products in the Baltics. Our
risks leading to new achievements in the areas of cor- fees received from investment services grew +43% during
porate lending, consumer finance and mortgage lending. 2007, with especially strong growth in custody.
The net profit of the Estonian business unit amounted EXPENSES
to 225 million euros in 2007, an increase of 28% com-
pared to the previous year. Higher base rates and grow- Hansabank Estonia’s total operating expenses increased
ing cost of funding together with managed operating by 27% yoy to 150 million euros. The highest growth was
expenses growth were the key drivers of Hansabank in administrative expenses (35%) due to the opening of
Estonia’s performance. new offices. Personnel expenses increased by 29% yoy;
219 new employees (excl. Group-level units and IT) were
REVENUES hired during the year.
Total income grew 31% in 2007 and reached 397 million Estonia has the lowest cost-income ratio in the Group and
euros. Growth was strongest in net interest income at during 2007 they were able to improve the ratio further to
39% where increasing base-rates, growing portfolio and 38%.
stable margins helped to achieve solid performance. During
the third and fourth quarters growth started to level off as ASSET QUALITY
increasing funding expenses put pressure on our net inter-
est margin. The loan portfolio of Hansabank Estonia in- Asset quality has been solid throughout the year. Towards
creased by 25% yoy, only half of the portfolio growth one the end of 2007, the slowdown of the real estate sector
year ago. The mortgage portfolio grew by 31%, the con- cautioned us to reassess the financial situation and debt
sumer finance portfolio by 33% and the corporate portfolio servicing capabilities of some of our clients. As a result
by 23%. We have witnessed a slight drop in our market the net loan losses have increased to 23 million euros in
shares – our bank lending market share declined from 46.7% 2007. Net loan losses formed 0.39% of beginning of the
at the end of 2006 to 44% a year later. year portfolio in 2007. The ratio of non-performing loans
(over 60 days overdue) to loan portfolio (12-month old
The start-up of non-life insurance business in the second portfolio) was 0.58% at the end of December 2007 com-
half of 2006 has been a success story – the business unit pared to 0.32% year ago.
34
Results by Business Units: Latvia
in millions of euros 2007 2006 Change
Total income 297.8 198.5 50%
Operating expenses 115.5 85.9 34%
Operating profit before provisions 182.3 112.6 62%
Net profit 133.8 88.8 51%
EVA** 91.2 67.7 35%
Return on allocated equity* 31.9% 34.4%
Cost-income ratio 38.8% 43.3%
Net loan losses*** 0.56% 0.44%
Net interest margin 3.25% 3.12%
Loans**** 5,976.5 4,456.8 34%
Deposits 2,445.1 2,210.1 11%
Allocated equity* 473.8 340.0 39%
Assets 7,261.2 5,511.0 32%
Number of employees (full-time equivalent) 2,577 2,247 15%
* Cost of equity used for EVA calculation was 8% in 2006 and 10% in 2007
** based on 8% capital adequacy for 2006 and 2007
*** net loan losses equals to (provisions+write-offs – recoveries) / beginning of the year loan portfolio
**** Loans to customers (excluding repos)
Despite the volatile and challenging market develop- EXPENSES
ments, 2007 was another highly successful year for
Hansabank Latvia. Coming from the very high volume The Latvian business unit has been investing heavily into
growth environment the difficult task of controlled initiatives increasing the future efficiency and stability of
growth was well executed and accomplished. the organization. Operating expenses grew by 34% yoy
with highest growth in data networking expenses +41%
Net profit of the Latvian business unit increased by yoy. Personnel expenses grew by 37% annually. The
51% yoy to 134 million euros in 2007. The bank has employee growth is gradually decreasing – the annual
benefited from rising base-rates and growing volumes. growth rate declined from 20% in 2006 to 15% in 2007.
REVENUES Despite the highest annual growth rate of operating
expenses in the Baltics, even stronger volume growth
The total income of the Latvian business unit increased allowed the Latvian unit to further increase its efficiency
by 50% yoy to 298 million euros. Loan portfolio growth as cost income ratio declined to 39%.
and rising RIGIBOR (especially pronounced in the second
and third quarter) contributed the most to the increase ASSET QUALITY
in net interest income - the main driver behind strong re-
sults. Strong growth was also seen in net fees (37%) sup- Similar to the situation in Estonia, the real estate sector
ported by the development of investment products and has been on hold toward the end of 2007 with a notewor-
higher lending fees from escalated refinancing of LVL thy decline in transaction numbers though a less signifi-
nominated loans due to the increase in RIGIBOR. cant drop in average prices. At the end of 2007, expected
cash flows of several corporate clients with real estate
The Latvian unit’s loan portfolio increased by 34% during exposure were revised to be more conservative. Net loan
2007. All core portfolios performed well – the mortgage losses for the Latvian business unit totaled 25 million euros
portfolio grew by 39%, consumer finance by 51% and cor- in 2007. The ratio of net loan losses to beginning of the
porate financing by 24%. Lending margins decreased over year portfolio was 0.56% which is higher than in our
the year by 7bp while deposit margins reached record level Estonian unit. Non performing loans amounted to 0.87%
of 3.57%. The net interest margin was 3.25% for 2007 of the total loan portfolio (12-month old portfolio).
which is the highest ratio among the Baltic business units.
Deposit growth was a modest 11% and tougher competi-
tion for local deposits has led to a slight decrease in our
market share – from 20% to 19% over the year. On the oth-
er hand, our market share in pillar 2 pension products has
increased both in terms of volumes and number of clients.
35
Results by Business Units: Lithuania
in millions of euros 2007 2006 Change
Total income 264.9 173.8 52%
Operating expenses 119.5 90.9 31%
Operating profit before provisions 145.4 82.9 75%
Net profit 112.0 61.7 82%
EVA** 77.2 42.9 80%
Return on allocated equity* 32.7% 26.6%
Cost-income ratio 45.1% 52.3%
Net loan losses*** 0.23% 0.31%
Net interest margin 2.80% 2.62%
Loans**** 5,367.5 3,685.2 46%
Deposits 3,633.1 2,940.4 24%
Allocated equity* 406.5 277.4 47%
Assets 7,278.2 5,087.1 43%
Number of employees (full-time equivalent) 3,380 3,027 12%
* Cost of equity used for EVA calculation was 8% in 2006 and 10% in 2007
** based on 8% capital adequacy for 2006 and 2007
*** net loan losses equals to (provisions+write-offs – recoveries) / beginning of the year loan portfolio
**** Loans to customers (excluding repos)
2007 brought swift improvements and impressive fi- EXPENSES
nancial results to Hansabankas. The organization has
strengthened tremendously over the past few years The Lithuanian business unit’s operating expenses grew
and impressive revenue growth together with improve- by 31% in 2007. Similarly to the Latvian unit, investments
ments in efficiency are a direct result of these achieve- into efficiency improvement initiatives have in the short
ments. term increased administrative expenses (33% yoy). Per-
sonnel expenses grew by 28% compared to the previous
The net profit of the Lithuanian business unit increased year. The number of employees in Lithuania grew by 353
by 82% yoy, making Hansabankas clearly the growth over the year (+12%) leaving the peak of employee growth
leader of the Group in 2007. Lithuanian net profit to 2006.
amounted to 112 million euros in 2007. Significant im-
provement in efficiency is reflected in the decreasing ASSET QUALITY
cost-income ratio – 45% in 2007, well below the tar-
geted 50%. Asset quality in Lithuania was very good. Net loan losses
amounted to 8 million euros in 2007, a modest 10% annual
REVENUES increase compared to the 46% growth of the loan port-
folio. They formed 0.23% of the beginning of year port-
Total income increased by 52% to 265 million euros in folio. Non-performing loans (overdue more than 60 days)
2007. Strong performance was achieved in core net in- to loan portfolio were 0.74% at the end of the year.
terest income (54%) by leveraging from positive market
and base rate developments. In addition, the Lithuanian
business unit has been able to almost double the trading
income, benefiting from the launching of investment de-
posits. Other revenues were notable due to fees from the
Ministry of Finance for intermediating the rouble deposits
compensation and from the sale of the subsidiary, Hansa
Insurance Brokerage.
The Lithuanian loan portfolio increased by 46% yoy with
equally strong growth in retail lending (+53%) and corpo-
rate financing (+41%). The deposit growth rate has been
the strongest in the Baltics – 24% yoy. Noticeable results
were achieved in investment management and assets
gathered increased 72% from 2006.
36
Results by Business Units: Russia
in millions of euros 2007 2006 Change
Total income 53.5 42.8 25%
Operating expenses 24.7 35.9 -31%
Operating profit before provisions 28.8 6.9 317%
Net profit 20.2 0.4 4,950%
EVA** 11.1 -4.4 -352%
Return on allocated equity* 24.7% 0.6%
Cost-income ratio 46.1% 84.0%
Net loan losses*** 0.74% 0.75%
Net interest margin 4.80% 5.32%
Loans**** 1,071.9 715.9 50%
Deposits 116.2 84.2 38%
Allocated equity* 92.8 66.9 39%
Assets 1,261.0 884.6 43%
Number of employees (full-time equivalent) 371 233 59%
* Cost of equity used for EVA calculation was 8% in 2006 and 10% in 2007
** based on 8% capital adequacy for 2006 and 2007
*** net loan losses equals to (provisions+write-offs – recoveries) / beginning of the year loan portfolio
**** Loans to customers (excluding repos)
The Russian business unit’s performance was challenged The Russian unit’s operating costs totaled 25 million euros
in spring 2007 when the Central Bank of Russia (CBR) in 2007, though without the reversal of the VAT operating
carried out an audit of OAO Swedbank and prescribed a risk provision the expenses would have been 6.4 million
number of actions to be taken to comply with the certain euros higher. Excluding this item, expense growth was 56%
acts of Russian Federal Law. Group’s management compared to 2006. The number of employees grew by
formed a team to work on the issues discovered and in 59% to 371 during 2007. The Russian unit has continued to
September CBR announced their decision to let Swed- build their banking organization and corporate lending
bank resume its operations in Russia at full scale. In operations. The loan portfolio of the Russian business
2008, the supervision of the Russian business will be unit increased by 50% to 1,072 million euros and the vol-
transferred to Swedbank International Banking unit. ume of deposits grew 38% to 116 million euros.
Our Russian business unit’s financial performance was ASSET QUALITY
affected by the restrictions and growth limitations im-
posed by the CBR. On the positive side, the first major The Russian asset quality remains excellent. Net loan
victory in VAT related dispute led to a reversal of provi- losses totaled 5.3 million euros over the year.
sion in the amount of 6.4 million euros. The net profit
of the Russian unit was 20 million euros in 2007.
REVENUES AND EXPENSES
Total income increased by 25% to 54 million euros in
2007. The main revenue item is net interest income,
which increased by 28% to 48 million euros. The net in-
terest margin of our Russian unit is decreasing given the
heightened competition and growing funding costs. Still,
the ratio is at a strong level of 4.8% - well above that of
the Baltic business units.
During the year, Hansa Leasing won several VAT related
court hearings and operational risk provision in the amount
of EUR 6.4 million was reversed at the end of 2007. In
addition to the stronger financial result the positive de-
velopment allows the Russian unit to reopen the leasing
business.
37
38
Innovation
is ﬁnding
simple solutions
to complex
problems.
39
Corporate
Governance
40
COUNCIL Board consisted of nine members: Erkki Raasuke (Chair-
man), Priit Põldoja (Deputy Chairman), Giedrius Dusev-
According to the Articles of Association of AS Hansapank, icius, Kristina Siimar, Aivo Adamson, Andres Trink, Maris
the Council shall consist of at least five, but not more Avotinš, Antanas Danys and Maris Mancinskis.
than twelve members. The members of the Council shall
be elected and recalled by the General Meeting of the According to the Principles for Corporate Governance,
shareholders. As Swedbank AB (publ) holds 100% of AS the Board is the highest executive body of Hansabank
Hansapank shares, there is no requirement to convene Group, and directs and monitors the activities thereof,
the shareholder’s meetings - instead the sole shareholder’s pursuant to the strategies and general principles approved
resolutions should be adopted. According to the sole share- by the Council. In addition, each Board member acts as
holder resolution dated 17 April 2006, five members were the executive officer of a respective business or support
elected to the Council: Jan Lidén (Chairman), Anders Ek unit of the Group. During 2007 the Board started discus-
(Vice-Chairman), Lennart Lundberg, Annika Wijkström sions on establishing the position of Chief Operating Offi-
and Lars Lundquist. The term of office of the Council mem- cer and the recruitment process commenced. It was also
bers was extended to three years and the corresponding decided that the COO will be a member of the Board. On
change was made to the Articles of Association. There 10 January 2008 Helo Meigas was approved as Chief
were no changes in the membership of the Council during Operating Officer and elected to the Board.
2007. On 18 December 2007 Lennart Lundberg submitted
his resignation letter due to his retiring. The resignation Regular Board meetings are held on a monthly basis. The
took effect on 1 February 2008. As 5 members is the regu- Board held 27 meetings in 2007, 13 of which were held
latory minimum for the credit institution’s council, Magnus without convening a meeting and 3 meetings were dedi-
Francke was elected as a new Council member starting 1 cated for strategy discussions.
February 2008.
The working language for the Board is English and the
According to the General Principles for Corporate Gover- minutes are also prepared in English.
nance in Hansabank Group and the Bylaws of Hansabank
Group, the Council’s key functions include, inter alia: en-
suring the effectiveness and efficiency of operations and BOARD COMMITTEES
creation of shareholder value; approving the Group’s
strategies, targets and policies; deciding on strategic in- The Board committees are the Board Credit Committee,
vestments, acquisitions and divestments; and approving Group Asset and Liabilities Management Committee
the procedures for monitoring Group’s activities. As a (ALMCO), Group Financial Committee, Group Retail Bank-
general principle, the consent of the Council is required ing Committee, Group Corporate Banking Committee,
for all issues of strategic (i.e. issues that are beyond the Group Project Committee, Group Investment Management
scope of everyday business activities) or principal signifi- Committee and Group Operations Committee. The Group
cance with regard to Hansabank Group operations. Operations Committee was renamed as the Operational
Excellence Steering Committee. During 2007 three new
In accordance with the Bylaws of Hansabank Group, the Board committees were established: Group Business
Council is entitled to establish and dissolve the Council Continuity Committee, Group Enterprise Data Warehouse
sub-committees. No Council sub-committees were estab- (EDW) Steering Committee and Group Risk Capital Pro-
lished in 2007 as the tasks of the sub-committees have gramme Steering Committee. The Board committees’
been delegated to the Swedbank Group level committees competence, regulation and membership shall be deter-
and bodies. mined by the Board.
Pursuant to the law and Articles of Association, regular The Board Credit Committee is the highest institution of
Council meetings should be held at least once every quarter. the credit risk management of the Group and it governs
The Council held 8 meetings in 2007, 4 of which were held operations of all the highest credit committees of struc-
without convening a meeting. tural units of the Group. The committee is entitled to pass
resolutions in all matters concerning the credit risk man-
The working language of the Council is English and minutes agement of the Group. Its principal responsibility is to de-
of the meetings are also prepared in English. cide upon credit applications within its confirmed limits of
competence as established by the Council. Decisions on
exposures exceeding 100 million euros are submitted for
BOARD final approval to the Swedbank Board Credit Committee.
The Credit Committee convenes on a weekly basis.
The Articles of Association states that the Management
Board (hereinafter the Board) shall consist of at least six The functions of the Financial Committee include setting
and not more than twelve members, elected by the Council financial counterpart limits and determining market risk
for a term of three years. On 12 February 2007 Andres limits on different portfolios. The meetings of the Financial
Trink was approved as Chief Risk Officer and elected to Committee take place at least every two weeks.
the Board. As a result of the aforementioned change, the
41
The ALMCO is the highest institution of the Group’s assets ing, constantly seek and exploit synergies and align pro-
and liabilities’ management, liquidity management, fund- cesses across the Group EDW and Business Intelligence
ing strategy, financial risk management, capital planning activities. The Committee is responsible for Group-level
and fund transfer pricing. The meetings of the ALMCO coordination of operational efficiency, quality improve-
take place at least once a month. ment activities and investments across various Business
Intelligence and EDW projects. The committee comprises
The Group Retail and Corporate Banking Committees have of up to five (5) members: Group CEO (Chairperson of the
been established to foster knowledge sharing inside the committee), Group CFO, Group CIO, Group CRO and CEO
Group, create synergies between the various business units of Hansabank Estonia. The Committee meetings take
and improve competitiveness. Both committees meet at place at least once every two months.
least bimonthly.
The Group Risk Capital Programme Steering Committee
The Group Project Committee is responsible for approv- was established on 18 June 2007 in the following compo-
ing, prioritizing, monitoring and evaluating product de- sition: Members of the Board and Swedbank Group CRO.
velopment projects within the Group. The committee Chairperson of the committee is Group CEO. The overall
meets at least once every month. goals of Risk Capital Programme are: increased competi-
tiveness through more efficient credit process; improved
The Group Investment Committee has been created to risk selections and improved corporate governance tools;
exploit synergies and exchange know-how at Group level improved tools, methods and knowledge for the business
in the areas of investment management, life insurance and organisations supporting increased effectiveness and
custody services. The committee meets every quarter. profitability in the business processes; improved ability to
act towards rating bureaus, supervisors and other stake-
The Group Operational Excellence Steering Committee holders in issues concerning risk, capital and profitability;
is a Group-level working and decision-making body es- and to achieve the approval of internal rating based (IRB)
tablished to motivate employees to achieve increased approach. The regular meetings take place monthly.
performance targets, lead decision-making, proactively
engage in problem solving for value delivery, and to The working language for the above Board committees is
constantly seek and exploit synergies and align pro- English and the minutes are also prepared in English.
cesses across the Group in the area of operations. The
Committee is responsible for implementation of the
Operational Excellence Initiative in the Group, as well
for Group-level leadership and coordination of opera-
tional efficiency and quality improvement activities
across various product lines, channels and processes.
The chairperson of the committee is the Group COO.
The Committee meetings shall take place once every
month during implementation of the Operational Excel-
lence program and afterwards upon need, but not less
frequently than quarterly.
The Group Business Continuity Committee is the highest
working body at Group level created in order to establish
the organisation and principles of business continuity
management. Among other competences this committee
reviews the reports of business continuity test results and
the reports of business continuity incidents, approves the
agreed action plans and monitors their implementation.
The committee comprises of up to seven (7) members
including Group CRO, Group CIO, Group IT Risk Manager,
Head of Group Corporate Banking Committee, Head of Group
Retail Banking Committee, Head of Group Investment
Management Committee and Head of Group Operational
Excellence Steering Committee. The chairperson of the
committee is Group CRO. The regular meetings take place
quarterly; in the event of business continuity incidents (crises
and disasters) the committee shall convene within 3 working
days.
The Group Enterprise Data Warehouse (EDW) Steering
Committee is a Group level decision-making body estab-
lished to oversee performance, coordinate decision-mak-
42
Consolidated
Financial
Statements
43
Consolidated Income Statement
EEK EUR
in millions, for the year Notes 2007 2006 2007 2006
Interest income 21,173.1 12,239.7 1,353.2 782.3
Interest expense -10,803.5 -5,193.2 -690.5 -331.9
Interest income, net 6 10,369.6 7,046.5 662.7 450.4
Fee and commission income 4,250.4 3,388.9 271.7 216.6
Fee and commission expense -1,068.2 -794.3 -68.3 -50.8
Fees and commissions, net 7 3,182.2 2,594.6 203.4 165.8
Net financial gains and losses 8 1,396.6 1,047.4 89.3 67.0
Net income from insurance activities 10 356.9 166.4 22.8 10.6
Other operating income 11 381.4 305.8 24.4 19.5
Total income 15,686.7 11,160.7 1,002.6 713.3
Personnel expenses 12 3,633.5 2,687.9 232.2 171.8
Data network expenses 13 515.9 390.6 33.0 25.0
Administrative expenses 14 1,175.5 888.9 75.1 56.8
Other expenses 16 706.1 887.8 45.2 56.7
Depreciation, amortisation and impairment losses 17 322.9 281.1 20.6 18.0
Total operating expenses 6,353.9 5,136.3 406.1 328.3
Operating profit before provisions 9,332.8 6,024.4 596.5 385.0
Losses on loans and guarantees -1,048.3 -659.8 -67.0 -42.2
Recovered loans 86.1 152.2 5.5 9.7
Share of profit of associates 11.2 10.5 0.7 0.7
Profit before income tax 8,381.8 5,527.3 535.7 353.2
Income tax 18 -816.6 -465.4 -52.2 -29.7
Profit for the year 7,565.2 5,061.9 483.5 323.5
Basic earnings per share 19 23.86 16.00 1.52 1.02
Diluted earnings per share 19 23.86 16.00 1.52 1.02
44
Consolidated Balance Sheet
EEK EUR
in millions, end of period Notes 31.12.2007 31.12.2006 31.12.2007 31.12.2006
Assets
Cash 4,394.0 3,695.2 280.8 236.2
Due from Central Bank 19,883.5 20,413.2 1,270.8 1,304.6
Due from other financial institutions 21 34,991.1 23,292.1 2,236.3 1,488.6
Financial assets held for trading 22 3,319.6 2,982.9 212.2 190.7
Financial assets designated at fair value through P/L 23 17,871.1 12,788.1 1,142.2 817.3
Available-for-sale securities 24 2.4 2.4 0.1 0.1
Held-to-maturity securities 25 2,080.3 1,908.6 133.0 122.0
Investments in associates 55 58.0 46.9 3.7 3.0
Prepayments and accrued interest 27 4,421.0 3,751.7 282.5 239.8
Loans 28 315,582.7 232,982.7 20,169.4 14,890.3
- Allowance for loan losses 28, 29 -2,445.2 -1,689.9 -156.3 -108.0
Net loans 313,137.5 231,292.8 20,013.1 14,782.3
Other assets 30 1,372.0 995.9 87.7 63.7
Tangible assets 31 2,100.4 1,798.5 134.2 114.9
Intangible assets 32 462.6 448.2 29.6 28.6
Total assets 20 404,093.5 303,416.5 25,826.2 19,391.8
Liabilities
Due to Central Bank and Government 38.0 81.5 2.4 5.2
Due to other financial institutions 34 172,532.1 105,548.6 11,026.8 6,745.8
Deposits 35 170,755.9 145,986.4 10,913.3 9,330.2
Demand deposits 111,047.3 105,404.6 7,097.2 6,736.6
Time deposits 59,708.6 40,581.8 3,816.1 2,593.6
Other financial liabilities 37 13,643.5 16,022.1 872.0 1,024.0
Accrued liabilities 38 6,651.8 4,972.3 425.1 317.8
Other liabilities 39 4,500.7 4,091.6 287.7 261.5
Provisions 40 6,459.9 4,601.8 412.9 294.1
Deferred tax liability 41 42.9 38.9 2.7 2.5
Total liabilities 20 374,624.8 281,343.2 23,942.9 17,981.1
Equity
Share capital 3,173.7 3,173.7 202.8 202.8
Share premium 504.1 504.1 32.2 32.2
Reserves 872.2 879.0 55.7 56.1
Revaluation differences -345.7 -254.2 -22.1 -16.1
Retained earnings 25,264.4 17,770.7 1,614.7 1,135.7
Total equity 29,468.7 22,073.3 1,883.3 1,410.7
Total liabilities and equity 404,093.5 303,416.5 25,826.2 19,391.8
45
Consolidated Statement of Cash Flows
EEK EUR
in millions, for the year Notes 2007 2006 2007 2006
Profit before income tax 8,381.8 5 527.3 535.7 353.2
Adjustments to profit before income tax
Loan losses 811.0 443.7 51.8 28.4
Interest income 6 -21,173.1 -12,239.7 -1,353.2 -782.3
Interest expense 6 10,803.5 5,193.2 690.5 331.9
Depreciation and amortisation 17 322.9 281.1 20.6 18.0
Profit from sales of tangible and intangible assets -19.1 -8.7 -1.2 -0.6
Book value of tangible assets written-off 31 – 8.4 – 0.5
Total adjustments to operating profit -9,254.8 -6,322.0 -591.5 -404.1
Changes in operating assets and liabilities
Net change in compulsory reserve to Central Bank -1,019.5 -1,417.9 -65.2 -90.6
Net change in deposits placed with other financial institutions -7,454.1 1,476.8 -476.4 94.4
Net change in loans to other financial institutions -1,362.1 -1,697.2 -87.0 -108.5
Net change in financial assets held for trading -2,215.6 -2,172.9 -141.6 -138.9
Net change in prepayments -243.7 -506.5 -15.6 -32.4
Net change in loans -82,600.0 -86,355.2 -5,279.1 -5,519.1
Net change in accrued liabilities 334.3 1,357.7 21.4 86.8
Net change in other assets -376.0 -105.3 -24.0 -6.8
Net change in short-term liabilities due to other financial institutions 9,556.8 8,163.0 610.8 521.8
Net change in demand deposits 5,643.7 25,675.6 360.7 1,641.0
Net change in time deposits 19,125.6 7,017.1 1,222.3 448.4
Net change in other liabilities 2,225.8 2,778.1 142.3 177.7
Total adjustments to operating assets and liabilities -58,384.8 -45,786.7 -3,731.4 -2,926.2
Interest received 20,747.5 11,951.8 1,326.0 763.9
Interest paid -9,839.8 -4,710.7 -628.9 -301.1
Income tax paid -605.0 -165.8 -38.7 -10.6
Net cash used in operating activities -48,955.1 -39,506.1 -3,128.8 -2,524.9
Cash from investing activities
Net change in strategic investments -182.8 -115.2 -11.7 -7.5
Acquisition of tangible assets 31 -709.5 -463.3 -45.3 -29.5
Proceed from sale of tangible assets 117.9 102.7 7.5 6.7
Acquisition of intangible assets 32 -37.6 -22.9 -2.4 -1.5
Proceed from sale of intangible assets – 0.8 – –
Net cash used in investing activities -812.0 -497.9 -51.9 -31.8
Cash from financing activities
Credit lines of Central Bank and Government paid -43.5 -449.3 -2.8 -28.7
Long-term loans received from other financial institutions 77,382.3 102,354.8 4,945.6 6,541.6
Long-term loans paid back to other financial institutions -23,405.1 -47,714.4 -1,495.9 -3,049.5
Issuance of debt securities -2,392.8 -5,529.3 -152.9 -353.4
Net change in subordinated liabilities 3,449.5 4,694.0 220.5 300.0
Dividends paid -78.3 – -4.9 –
Net cash provided by financing activities 54,912.1 53,355.8 3,509.6 3,410.0
Effect of the change in exchange rate from foreign subsidiaries 91.5 -84.5 5.7 -5.4
Net increase in cash and cash equivalents 5,236.5 13,267.3 334.6 847.9
Cash and cash equivalents at the beginning of the year 38,676.4 25,409.1 2,471.9 1,624.0
Cash and cash equivalents at the end of the year 43,912.9 38,676.4 2,806.5 2,471.9
46
Analysis of cash and cash equivalents
EEK EUR
December 31, in millions 2007 2006 Change 2007 2006 Change
Cash 4,394.0 3,695.2 698.8 280.8 236.2 44.6
Balances with Central Bank 13,067.9 14,617.3 -1,549.4 835.2 934.2 -99.0
Placements with other banks 13,238.9 10,356.0 2,882.9 846.1 661.8 184.3
Liquidity securities 13,212.1 10,007.9 3,204.2 844.4 639.7 204.7
Total 43,912.9 38,676.4 5,236.5 2,806.5 2,471.9 334.6
47
Consolidated statements of changes in equity
EEK EUR
in millions 2007 2006 2007 2006
Share capital
Balance at the beginning of the year 3,173.7 3,173.7 202.8 202.8
Balance at the end of the period 3,173.7 3,173.7 202.8 202.8
Share premium
Balance at the beginning of the year 504.1 504.1 32.2 32.2
Balance at the end of the period 504.1 504.1 32.2 32.2
Reserves-general banking reserve
Balance at the beginning of the year 341.7 341.7 21.8 21.8
Balance at the end of the period 341.7 341.7 21.8 21.8
Reserves-statutory reserve
Balance at the beginning of the year 436.8 391.5 27.9 25.0
Appropriations to statutory reserve 93.2 45.3 6.0 2.9
Balance at the end of the period 530.0 436.8 33.9 27.9
Other reserves - stock dividends of subsidiaries
Balance at the beginning of the year 100.5 100.5 6.4 6.4
Change in other reserves -100.0 – -6.4 –
Balance at the end of the period 0.5 100.5 – 6.4
Currency translation reserve
Balance at the beginning of the year -254.2 -169.8 -16.1 -10.8
Net change in currency translation reserve 16.4 -84.4 0.9 -5.3
Balance at the end of the period -237.8 -254.2 -15.2 -16.1
Cash-flow hedge (effective portion)
Balance at the beginning of the year – – – –
Net change in cash-flow hedge reserve -107.9 – -6.9 –
Balance at the end of the period -107.9 – -6.9 –
Retained earnings
Balance at the beginning of the year 17,770.7 12,754.1 1,135.7 815.1
Profit for the year 7,565.2 5,061.9 483.5 323.5
Dividends paid -78.3 – -4.9 –
Appropriations to statutory reserves -93.2 -45.3 -6.0 -2.9
Appropriations from other reserves 100.0 – 6.4 –
Balance at the end of the period 25,264.4 17,770.7 1,614.7 1,135.7
Total equity 29,468.7 22,073.3 1,883.3 1,410.7
Minority interests
Balance at the beginning of the year – 6.2 – 0.4
Acquisition of subsidiaries – -6.2 – -0.4
Balance at the end of the period – – – –
48
Note 1. Corporate Information
AS Hansapank (hereinafter referred to as “the Bank) is a financial institution in the form of a public liability company
(AS) domiciled in Estonia.
The consolidated financial statements of AS Hansapank for the year ended 31 December 2007 comprise AS Hansapank
and its subsidiaries (together referred to as the “Group”) and the Group’s interest in associates.
Swedbank AB owns 100% of AS Hansapank shares as of 31 December 2007. AS Hansapank consolidated financial state-
ments are therefore consolidated into Swedbank AB annual financial statements.
The consolidated financial statements of AS Hansapank and its subsidiaries are approved by the Supervisory Council
and the Management Board and are presented for final approval to the annual general shareholders’ meeting of AS
Hansapank. The Bank is subject to the regulatory requirements of Eesti Pank (the Central Bank of Estonia). These regu-
lations include those pertaining to minimum capital adequacy requirements, classification of loans and off-balance sheet
commitments, credit risk connected with clients of the Bank, liquidity, interest rate risk and foreign currency position. Simi-
larly, the Group entities are subject to regulatory requirements, specifically in relation to insurance and collective invest-
ment.
Note 2. Statement of Compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
(IFRS) as adopted by the European Union (the EU) and their interpretations. The standards are issued by the Interna-
tional Accounting Standards Board (IASB) and their interpretations by the International Financial Reporting Interpreta-
tions Committee (IFRIC).
ADOPTION OF NEW AND REVISED STANDARDS
Standards and Interpretations effective in the current period
In the current year, the Group has adopted IFRS 7 Financial Instruments: Disclosures which are effective for annual re-
porting periods beginning on or after 1 January 2007. The impact of the adoption of IFRS 7 has been to expand the dis-
closures provided in these financial statements regarding the Group’s financial instruments.
The consequential amendments to IAS 1 Presentation of Financial Statements and four Interpretations issued by the In-
ternational Financial Reporting Interpretations Committee are effective for the current period. These are: IFRIC 7 Apply-
ing the Restatement Approach under IAS 29, Financial Reporting in Hyperinflationary Economies; IFRIC 8 Scope of IFRS
2; IFRIC 9 Reassessment of Embedded Derivatives; and IFRIC 10 Interim Financial Reporting and Impairment. The Group
adopted amendments to IAS 1 and the four above-mentioned interpretations already in previous years.
Standards and Interpretations in issue not yet adopted
At the date of authorisation of these financial statements the following Standards and Interpretations were in issue but
not yet effective:
• IAS 23 (Revised) Borrowing Costs (effective for accounting periods beginning on or after 1 January 2009) (not yet
endorsed by the EU);
• IFRS 8 Operating Segments (effective for accounting periods beginning on or after 1 January 2009), (not yet en-
dorsed by the EU);
• IFRIC 11 IFRS 2: Group and Treasury Share Transactions (effective for accounting periods beginning on or after 1 March
2007);
• IFRIC 12 Service Concession Arrangements (effective for accounting periods beginning on or after 1 January 2008)
(not yet endorsed by the EU);
• IFRIC 13 Customer Loyalty Programmes (effective for accounting periods beginning on or after 1 July 2008) (not yet
endorsed by the EU);
• IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (effective
for accounting periods beginning on or after 1 January 2008) (not yet endorsed by the EU);
• IFRS 3 (Revised) Business Combinations (effective for accounting periods beginning on or after 1 July 2009) (not yet
endorsed by the EU);
• IFRS 2 (Revised) share-based Payment (effective for accounting periods beginning on or after 1 July 2008) (not yet
endorsed by the EU);
49
• IAS 1 (Revised) Presentation of Financial Statemants (effective for accounting periods beginning on or after 1 January
2009) (not yet endorsed by the EU);
• IAS 27 (Revised) Consolidated and Separate Financial Statemants (effective for accounting periods beginning on or
after 1 January 2009) (not yet endorsed by the EU).
The Group anticipates that all of the adoption of the above Standards and Interpretations will have no material impact
on the financial statements of the Group in the period of initial application.
Note 3. Signiﬁcant Accounting Judgements and Estimates
Presentation of consolidated financial statements in conformity with IFRS requires the entity to make judgements and
estimates that affect the recognised amounts for assets, liabilities and disclosures of contingent assets and liabilities as
of the balance sheet date as well as recognised income and expenses for the reporting period. Actual results may deviate
from estimates.
JUDGEMENTS
Entities in the Group have established investment funds for their customers’ savings needs. The Group manages the assets
of these funds on behalf of customers in accordance with predetermined provisions approved by the Financial Supervision
Authority of Estonia. The return generated by these assets accrues to customers. Within the framework of the approved
fund provisions, the Group receives management fees as well as application and withdrawal fees for the management
duties it performs. Because decisions regarding the management of an investment fund are governed by the fund’s pro-
visions, the Group is not considered to have the opportunity to control or dominate decision-making in the investment
funds in order to obtain economic benefits. The Group’s compensation and risk is limited to the fee charges. In certain
cases, group entities also invest in investment funds to fulfill their obligations to customers. Shares in the investment
funds do not represent any influence, regardless of whether the holding exceeds 50 per cent or not. Taken together, the
above-mentioned conditions are the basis for not consolidating the investment funds.
ESTIMATES
The Group makes various estimates to determine the value of certain assets and liabilities. When the value of loans as
well as other financial assets, for which loss events have occurred, is tested for impairment, an estimate is made of when
in the future and in which amount relevant cash inflow will occur. The measurement of financial instruments is described
in Note 4 Summary of Significant Accounting Policies.
Annual impairment tests for intangible assets with indefinite useful life estimate when the assets’ future cash flows will
occur and what their amounts are. A suitable discount rate is determined to reflect both time value of money and the
risk with which the asset is associated.
Note 4. Summary of Signiﬁcant Accounting Policies
BASIS OF PREPARATION
The consolidated financial statements are presented in millions of euros, unless indicated otherwise. AS Hansapank
measurement currency is the Estonian kroon. As the Estonian kroon is pegged to the euro with an exchange rate of
15.6466 kroons per euro, the consolidated financial statements are presented in euros as the reporting currency of the
Group.
The Group entities perform their accounting and prepare their financial statements for regulatory purposes in accor-
dance with accounting principles generally accepted in Estonia or those of other jurisdictions in which the Group oper-
ates. The accompanying financial statements are based on the accounting records, together with appropriate adjust-
ments and reclassifications necessary for fair presentation in accordance with IFRS.
The consolidated financial statements have been prepared under the historical cost convention as modified by the
remeasurement of available-for-sale securities, financial assets and financial liabilities held at fair value through profit
or loss and all financial derivatives, to fair value.
The accounting policies have been consistently applied by all Group entities. The principal accounting policies adopted
are set out below.
50
BASIS OF CONSOLIDATION
Subsidiaries
The consolidated financial statements include all subsidiaries that are controlled by the parent company. When an entity
began or ceased to be controlled during the year, the results are included only from the date control commenced or up
to the date control ceased. Control is presumed to exist where more than one half of a subsidiary’s voting power is con-
trolled by the parent company, or the parent company is able to govern the financial and operational policies of a subsidiary,
or control the removal or appointment of a majority of subsidiary’s board of directors.
Associates
Associates are those enterprises in which the Group has significant influence, but not control, over the financial and op-
erating policies. The consolidated financial statements include the Group’s share of the total recognised gains and losses of
associates on an equity accounting basis, from the date that significant influence effectively commences until the date
that significant influence effectively ceases.
Subsidiaries and associates which are intended to be disposed of and whose carrying amount will be recovered princi-
pally through a sale transaction, are accounted for at lower of carrying amount and fair value less costs to sell and in-
cluded among securities available-for-sale. Investments in subsidiaries and associates in parent’s single financial state-
ments are presented at cost. At least once per year an impairment test is performed.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised gains and losses arising from intra-group transactions, are
eliminated in full in preparing the consolidated financial statements. Unrealised gains arising from transactions with
associates are eliminated to the extent of the Group’s interest in the enterprise. Unrealised losses are eliminated in the
same way as unrealised gains except that they are only eliminated to the extent that there is no evidence of impairment.
Minority interests
Minority interests in the equity and the results of the subsidiaries that are controlled by the Group are shown as a separate
item in the consolidated financial statements.
FOREIGN CURRENCY
Foreign currency transactions
Transactions in foreign currencies are translated into functional currency, Estonian kroon, at the foreign exchange rate
effective at the date of the transaction. At the balance sheet date, foreign currency monetary assets and liabilities are
retranslated to the Estonian kroon at the foreign exchange rate in effect at that date. Non-monetary items that are mea-
sured on historical cost basis are translated to the Estonian kroon at the foreign exchange rate effective at the date of
transaction. Foreign exchange differences arising on translation of foreign currency transactions are recognised in the
income statement for the year.
Financial statements of foreign operations
Assets and liabilities of foreign operations are translated to Estonian kroon at foreign exchange rates effective at the
balance sheet date. The income statements of foreign operations are translated to Estonian kroon using the average
foreign exchange rates of the financial year. Foreign exchange differences arising from translation of foreign operations
are recognised directly in equity. On disposal of a foreign operation such foreign exchange differences are recognised in
the income statement.
DERIVATIVE FINANCIAL INSTRUMENTS
The Group uses derivative financial instruments, interest rate swaps and forward exchange contracts, to manage its ex-
posure to foreign exchange, and interest rate risks arising from operational, financing and investment activities. Foreign
exchange options and stock options are offered to clients to service their needs.
In accordance with requirements of IAS 39 all derivative contracts are carried on balance sheet accounts at their fair
value: all contracts with positive value in assets and all contracts with negative value in liabilities. Fair value of derivative
financial instruments is reported in the balance sheet as “Financial assets held for trading” and “Other financial liabili-
ties”. In order to determine the fair value of currency and interest related derivative contracts the Bank has performed
discounted cash flow calculations.
The basis of fair value of equity-related and other derivative instruments is market price (option pricing models or dis-
counted cash flow models as appropriate, is used for determination of market value) of the respective derivative instru-
51
ment. All gains and losses resulting from a change in fair value of derivative financial instruments are recognised in the
income statement line “Net financial gains/losses”.
HEDGING
The Group uses 2 types of hedges (1) fair value hedge to hedge the exposure to changes in the fair value and (2) cash
flow hedge to hedge the exposure to variability in cash flows of a recognised asset or liability that is attributable to a
particular risk and which will affect the reported net income. The Group’s criteria for classifying a derivative instrument
as a hedge include (1) the hedge transaction is expected to be highly effective in achieving offsetting changes in fair val-
ue attributable to the hedged risk, (2) the effectiveness of the hedge can be reliably measured, and (3) there is adequate
documentation of the hedging relationships at the inception of the hedge.
Derivatives classified as fair value hedges are carried at fair value with the corresponding change in the fair value recog-
nised in the income statement. The carrying amount of the hedged asset or liability is also adjusted for changes in fair
value attributable to the hedged risk and the gain or loss associated with that re-measurement is also recognised in the
income statement on the same line (“Net financial gains/losses”) with the hedging derivative’s changes.
Changes in the fair value of derivatives that are designated and qualify as cash flow hedges and that prove to be highly
effective in relation to hedged risk are recognised in the “Hedging reserve” in shareholders’ equity. Amounts deferred in
equity are transferred to the income statement and classified as gain or loss in the periods during which the hedged assets
and liabilities affect the income statement. The ineffective portion of the hedge is charged directly to the income state-
ment line “Net financial gains/losses”.
OFFSETTING
The Group offsets a financial asset and a financial liability and reports the net amount in the balance sheet when the Group:
a) Has a legally enforceable right to set off the recognised amounts and;
b) Intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
RECOGNITION OF INCOME AND EXPENSE
Interest income and expenses are recognised in the income statement on an accrual basis using the effective interest
rate. Interest income includes coupons earned on fixed income investments and trading securities and accrued discount
and premium on treasury bills and other discounted investments. Fees and commissions and other income are credited
to income when related transactions are completed. Non-interest expenses are recognised at the time the transaction
occurs. Net financial gains/losses comprise income and expenses from the trading portfolio, including from revaluation
of securities held for trading and other financial instruments.
Dividend income is recognised when the shareholder’s right to receive payment is established. Dividend liability is recog-
nised on the date fixed by the annual shareholders’ meeting.
FINANCIAL ASSETS
A financial asset is any asset that is cash, a contractual right to receive cash or another financial asset from another entity,
a contractual right to exchange financial instruments with another entity under conditions that are potentially favourable,
an equity instrument of another entity or a derivative or non-derivative contract that will or may be settled in the Group’s
own equity instruments.
Regular way purchases or sales of financial assets are recognised using trade date accounting, except for loans and ad-
vances.
Financial assets are impaired if there is any objective evidence of impairment as a result of the occurrence of a loss
event that has an impact on the estimated future cash flows of those financial assets. The amount of the impairment
loss for assets carried at amortised cost is calculated as the difference between the assets’ carrying amount and the
present value of the expected future cash flows discounted at the financial asset’s original effective interest rate.
Objective evidence that a financial asset or group of assets is impaired includes observable data that comes to the
attention of the Group about the following loss events:
1) Significant financial difficulty of the issuer or obligor;
2) A breach of contract, such as a default or delinquency in interest or principal payments;
3) The Group granting to the borrower, for economic or legal reasons relating to the borrower’s financial difficulty,
a concession that the lender would not otherwise consider;
52
4) It becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
5) The disappearance of an active market for that financial asset because of financial difficulties; or
6) Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of
financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the
individual financial assets in the group, including:
• Adverse changes in the payment status of borrowers in the Group; or
• National or local economic conditions that correlate with defaults on the assets in the Group.
If impairment of financial assets is identified, the Group recognises relevant losses through use of an allowance account
in the income statement.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash, balances with the Central Bank (excluding the minimum reserve), correspondent
accounts and overnight deposits in other banks and liquidity securities.
Cash flows from operating activities are reported under the indirect method. Cash flows from investing and financing
activities are reported based on gross receipts and disbursements made during the accounting period.
DEBT AND EQUITY SECURITIES
Securities held by the Group are categorised into portfolios in accordance with the Group’s intent on the acquisition of
the securities and pursuant to the Group’s security investment strategy. The Group developed a security investment
strategy and, reflecting the intent of the acquisition, allocated securities to “Securities and other assets held for trading”
and investment securities to the “Securities available for sale” and the “Securities and other assets held to maturity”.
The principal difference among the portfolios relates to the approach to the measurement of securities and the recognition
of their fair values in the financial statements.
All securities held by the Group are recognised using trade date accounting and initially recorded at their cost including
transaction costs (acquisition cost) for all financial assets not carried at fair value through profit or loss.
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
A financial asset measured at fair value through profit or loss is an asset that is either held for trading purposes or des-
ignated at fair value upon initial recognition.
Trading debt and certain equity securities are held by the Group with the intention of selling in order to generate profits
on price fluctuations in the short term. Derivatives are also categorised as held for trading unless they are designated
and effective hedges, or derivative financial guarantee contracts. Financial assets designated at fair value through profit or
loss consist of certain shares in investment funds and unit-linked bonds.
Upon initial recognition, the aforementioned financial assets are measured at their fair value. Financial assets designated
at fair value comprise instruments that are measured and their performance is evaluated on a fair value basis because it
eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from mea-
suring assets or liabilities or recognising the gains and losses on them on different bases. Subsequent changes in their
fair values are recognised in the income statement as “Net financial gains/losses”. For debt and equity securities traded
on stock exchanges, fair values are derived from quoted market prices. Fair values of those securities not traded, are es-
timated by the management of the Group as the best estimation of the cash flow projection reflecting the set of economic
conditions that will exist over the remaining useful life of those securities.
Those held-for-trading financial assets that do not have a quoted market price and whose fair value cannot be reliably
measured by other models are measured at cost, less allowance for permanent diminution in value, when appropriate.
SECURITIES AVAILABLE FOR SALE
Securities available for sale are non-derivative securities held by the Group for an indefinite period of time that are
available for sale as liquidity requirements arise or market conditions change.
The Group holds only such available-for-sale financial assets (strategic investments) that do not have a quoted market
price and whose fair value cannot be reliably measured by other models. Those investments are measured at cost, less
allowance for permanent diminution in value, when appropriate.
53
SECURITIES HELD TO MATURITY
Securities held to maturity are non-derivative financial assets with fixed maturity and determinable payments that the
Group has the positive intent and ability to hold to maturity.
Securities held to maturity are initially measured at their fair values plus any directly attributable transaction costs. Se-
curities held to maturity are subsequently measured at amortised cost using the effective interest rate method, less any
accumulated impairment losses. The amortisation of premiums and discounts is reported as “Interest income”.
Fair values of those securities are estimated by the management of the Group as the best estimation of the cash flow
projection reflecting the set of economic conditions that will exist over the remaining useful life of those securities.
SECURITIES REPURCHASE AGREEMENTS
Securities purchased under resale agreements and securities sold under repurchase agreements are treated as collater-
alised lending and borrowing transactions. They are carried at the amounts at which the securities were acquired or sold
and divided according to the counterpart between balance sheet lines “Due from other financial institutions” and “Loans”
plus the accrued interest. The interest income/expense from resale/purchase agreements is recorded under interest income
or expense respectively using the effective interest rate method.
LOANS AND ADVANCES, PLACEMENTS WITH OTHER BANKS, OTHER OFF-BALANCE SHEET CREDIT
EXPOSURES AND ALLOWANCE FOR LOSSES ON LOANS, PLACEMENTS AND ADVANCES
Loans and advances, and placements with other banks are stated at the amortised cost, net of allowance for possible
loan, advance or placements losses, respectively. Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. Interest is accrued and credited to income based on the
principal amount outstanding using the effective interest rate method. All loans and advances are recognised when cash
is advanced to borrowers.
When a borrower is unable to meet payments as they become due or, in the opinion of the management, there is an indi-
cation that a borrower may be unable to meet payments as they become due, allowance is recognised. The amount of
allowance is the difference between the carrying amount and the recoverable amount, being the present value of the
expected cash flows, including amounts recoverable from guarantees and collateral, discounted at the original effective
interest rate. The amount necessary to adjust the allowances to their assessed levels, after write-offs, is charged to income
statement line “Losses on loans and guarantees”.
The Group first assesses, individually or collectively, whether there is objective evidence that financial assets that are indi-
vidually significant and financial assets that are not individually significant, are impaired. When the Group determines that
no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes
the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment.
Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised,
are not included in the collective assessment of impairment. If there is an objective evidence that an impairment loss on
loans and receivables or held-to-maturity investments carried at amortised cost has been incurred, the amount of the
loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash
flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective
interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of
the loss is recognised in the income statement. If a loan or held-to-maturity investment has a variable interest rate, the
discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.
The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the cash flows
that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.
For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk
characteristics (i.e., on the basis of the Group’s grading process that considers asset type, industry, geographical loca-
tion, collateral type, past-due status and other relevant factors). Those characteristics are relevant to the estimation of
future cash flows for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according to
the contractual terms of the assets being evaluated.
Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis
of the contractual cash flows of the assets in the Group and historical loss experience for assets with credit risk charac-
teristics similar to those in the Group. Historical loss experience is adjusted on the basis of current observable data to
54
reflect the effects of current conditions that did not affect the period on which the historical loss experience is based
and to remove the effects of conditions in the historical period that do not exist currently.
Estimates of changes in future cash flows for groups of assets should reflect and be directionally consistent with changes
in related observable data from period to period (for example, changes in unemployment rates, property prices, payment
status, or other factors indicative of changes in the probability of losses in the group and their magnitude). The methodolo-
gy and assumptions used for estimating future cash flows are reviewed regularly by the Group to reduce any differences
between loss estimates and actual loss experience.
Write-offs are generally recorded after all reasonable restructuring or collection activities have taken place and the pos-
sibility of further recovery is considered to be remote. The loan is written off against the related account “Losses on
loans and guarantees” in the profit and loss account. If the reason for the recognised allowance is no longer deemed
appropriate, the redundant allowance charge is released into income. The relevant amount and recoveries of loans and
advances previously written off are reflected in the profit and loss account through “Recovered loans”.
LEASING
Group as a lessor
The Group provides mostly finance leases. A finance lease is a long-term lease transaction under which all material rights
and obligations related to the use of the leased asset transfer to the lessee. Finance lease receivables are recognised as
loans to customers. Lease payments less the reduction of the outstanding liability are recorded as interest income as cal-
culated under an effective interest method to provide a constant rate of return on the net investment in the leases.
Group as a lessee
The Group has operating leases mainly for the leasing of premises. Total payments made under operating leases are
charged to the income statement on a straight-line basis over the period of the lease.
TANGIBLE ASSETS
Tangible assets are recorded at acquisition cost, which consists of the purchase price and other directly associated
expenses. Assets classified as tangible assets are land, buildings and other assets with long-term useful lives. Land and
art are not depreciated. Depreciation on other tangible assets is calculated on a straight-line basis at annual rates of
4-8 per cent on buildings and of 20 or 33 per cent on other tangible assets.
The Group periodically tests its tangible and intangible assets for impairment. Where the carrying amount of an asset is
greater than its estimated recoverable amount, it is written down to this recoverable amount. Write down is recorded in
income statement line “Depreciation, amortisation and impairment losses”. Repairs and renewals are charged to the in-
come statement when the expenditure is incurred.
INTANGIBLE ASSETS
Goodwill
For business combinations that took place prior to March 31, 2004, goodwill recognised represents the excess of the ac-
quisition cost over the fair value of the Group’s share of the net assets of the acquired subsidiary/associated undertaking
at the date of acquisition. Goodwill is reported in the balance sheet as an intangible asset and is amortised using the
straight line method over the estimated useful life. On January 1, 2005, the related accumulated amortisation was elimi-
nated with a corresponding decrease in its cost value and amortisation of such goodwill was discontinued. Subsequently,
such goodwill is measured at the carrying value determined on 1 January 2005 less any accumulated impairment losses.
For business combinations taking place on or after March 31, 2004, goodwill is recognised and subsequently measured
in accordance with IFRS 3 Business Combinations. Goodwill is initially measured at its cost, being the excess of the cost
of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contin-
gent liabilities recognised. The excess of the Group’s interest in the net fair value of the identifiable assets, liabilities and
contingent liabilities recognised over the cost of the business combination, the excess is immediately recognised in prof-
it and loss. After initial recognition, goodwill acquired in a business combination is measured at cost less any accumulat-
ed impairment losses. When an impairment of assets is identified, the Group recognises the impairment through the
profit and loss account line “Depreciation, amortisation and impairment losses”.
Cash generating units for goodwill are considered to be assets and liabilities obtained through the acquisition of banks
and leasing companies. Calculation of value in use is based on the following assumptions:
55
• 2008-2011 cash flow projections are based on a business plan, where the average annual growth rate of profit is 24%.
• When finding the 2012-2016 cash flows, the profit growth rate of 7% is used. The lower growth rates (5%) for the
years starting from 2017 are based on the assumption that the volume increase in financing activities will slow down
in the market.
• Cash flow discount rate 10 % is used.
• Key assumptions are based on past experience.
According to the impairment test the recoverable value exceeds substantially the carrying value of goodwill; therefore
no impairment has been identified.
Intangible assets with finite useful lives
Licences are stated at the lower of historical cost and recoverable amount and are amortised using the straight-line
method over their estimated useful lives. Development costs are charged as an expense in the income statement in the
period in which they are incurred.
FINANCIAL LIABILITIES
A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another entity,
a contractual obligation to exchange financial instruments with another entity under conditions that are potentially un-
favourable, or a derivative or non-derivative contract that will or may be settled in the Group’s own equity instruments.
A financial liability measured at fair value through profit or loss is an instrument that is either held for trading purposes
or is designated at fair value upon initial recognition. Derivatives are categorised as held for trading unless they are desig-
nated and effective hedges, or derivative financial guarantee contracts. Other financial liabilities are initially recognised on
the trade date at cost and subsequently measured at amortised cost. Amortised cost is calculated by discounting the
remaining future payments by the effective interest rate. Interest expense includes interest payments, on the accrual
basis of accounting, and relevant amortisation cost.
Fair values of those liabilities, are estimated by the management of the Group as the best estimation of the cash flow
projection reflecting the set of economic conditions that will exist over the remaining useful life of those liabilities.
DEBT SECURITIES ISSUED TO PUBLIC
Structured bonds consist of a deposit and calculated index option. The option portion of the bond is measured at fair
value based on market prices. Interest paid on the deposit part is reported under “Interest expense” and change in fair
value of the option part is recorded in “Net financial gains/losses”.
INSURANCE TECHNICAL PROVISIONS
In accordance with IFRS 4, the contracts written as life insurance are classified into insurance contracts and investment
contracts, depending on the amount of insurance risk ceded. Some types of insurance contracts are in turn unbundled
into an insurance component and a deposit component. Liabilities arising from investment contracts and deposit com-
ponents of insurance contracts are measured according to IAS 39.
Other liabilities from insurance contracts – technical provisions – consist of life insurance provision, provision for unearned
premiums and provision for outstanding claims. Technical provisions are recorded in the balance sheet line “Provisions”.
The life insurance provision consists of the present value of future payments to the insured client, less the present value
of all future insurance premiums received from the client. The provision for unearned premiums represents an allocation
of the collected insurance premiums on accrual basis of premiums received to the period that it relates to. The provision
for outstanding claims’ consists of the sum of claims that have been assessed and handled, but not yet paid out and the
sum of indemnities of claims that have been registered, but not yet handled. Changes in technical provisions are recorded
under “Net income from insurance activities” in the income statement.
TAXATION
The income tax regime effective in Estonia from 1 January 2000 abolished the corporate income tax on retained earnings
for resident corporate identities. Companies pay income tax on profit distribution (dividends) and on transactions that
may be considered as indirect distribution of profits (benefits, gifts, etc). Due to the changed concept of taxation the
term taxation base of assets and liabilities loses its economic meaning and deferred tax liabilities and assets as defined
in IAS 12 – Income Tax, are not applicable.
56
Income tax on dividends in Estonia is recognised as expense at the moment dividends are declared and recorded under
“Income tax” in the income statement.
In subsidiaries located in jurisdictions other than Estonia deferred income taxes are provided using the balance sheet
liability method of accounting for income taxes, under which deferred tax consequences are recognised for tax losses
carried forward, being differences between the tax bases of assets and liabilities and their carrying amount for financial
reporting purposes. The amount of deferred income taxes on these differences is determined using the tax rates that
are expected to apply to the period when the asset is realised or the liability is settled, as applicable, based on taxes
(and tax laws) that have been enacted or substantively enacted by the balance sheet date.
Deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable
profit will be available against which the deductible temporary differences can be utilised.
Deferred tax liabilities are recognised for all taxable temporary differences except to the extent that the timing of the
reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse
in the foreseeable future.
PROVISIONS FOR FINANCIAL GUARANTEES AND OFF-BALANCE SHEET CREDIT RELATED COMMITMENTS
In the normal course of business, the Group enters into credit related commitments which are recorded in off-balance
sheet accounts and primarily include financial guarantees, loan commitments and undisbursed loan facilities. Provisions
are made for estimated losses on these commitments when the Group has a present legal or constructive obligation as a
result of past events and it is probable that an outflow of resources embodying economic benefits will be required to
settle the obligation and a reliable estimate of the amount of the obligation can be made.
CONTINGENT LOSSES AND GAINS
The amount of a contingent loss is recognised as an expense and a liability if it is probable that future events will confirm
that after taking into account any related probable recovery, an asset has been impaired or liability incurred at the balance
sheet date and a reasonable estimate of an amount of the resulting loss can be made. Contingent gains are not recognised
as income or as an asset in the financial statements.
SHAREHOLDER’S EQUITY
Reserves
General banking reserve is a reserve established for losses that may result from general risks related to credit institutions’
core activity.
Statutory reserve comprises the capital reserve required by the Estonian Commercial Code. Subject to a decision by
the annual shareholders’ meeting, the statutory reserve can be used for covering losses if the latter cannot be covered
with unrestricted equity, or by increasing share capital. The statutory reserve is formed from annual net profit transfers
and cannot be distributed to the shareholder.
Other reserves comprises subsidiaries’ retained earnings in the amount that the Bank has used to increase its subsidiaries’
share capital without making additional monetary contributions.
SEGMENT REPORTING
Segment results include revenue and expenses directly attributable to a segment and the relevant portion of revenue
and expenses that can be allocated to a segment, whether from external transactions or from transactions with other
segments of the Group. Inter-segment transfer pricing is based on cost plus an appropriate margin, as specified by
Group policy. Unallocated items mainly comprise administrative expenses. Segment results are determined before any
adjustments for minority interest.
Segment assets and liabilities comprise those operating assets and liabilities that are directly attributable to the segment or
can be allocated to the segment on a reasonable basis. Segment assets are determined after deducting related adjustments
that are reported as direct offsets in the Group’s balance sheet. Segment assets and liabilities do not include income tax items.
57
Note 5. Risk policy and Management
Taking risks in a considered manner in order to generate income is fundamental to banking operations. Risk must, how-
ever, always be weighed against expected returns. The risk policy of Hansabank originates from Swedbank group risk
and capital policy. It is based on the underlying principle that the organization’s success depends on adequate assess-
ment, continuous monitoring and effective handling of risks as well as on sound risk culture and good corporate gover-
nance. As part of Swedbank Group, Hansabank maintains a low risk profile characterized by a well-diversified credit
portfolio, limited financial risks and a low level of operational risk. During 2007, focus was put on further alignment of
risk policy implementation across all Swedbank Group business units according to group standard.
RISK YEAR OF 2007
The year 2007 was characterized by a peak in the Baltic economies with high levels of credit supply and high asset prices.
The second half of the year brought a noticeable slowdown in the credit markets, especially in Estonia and Latvia, a lower
level of activity in the residential real estate market and turbulence in the international financial markets.
Risk management activities in 2007 focused on ensuring proactive assessment of macroeconomic risks and their impact
on the bank’s credit origination standards and portfolio quality. Credit issuance principles were continuously monitored
and assessed against the underlying counterparty and market risks. Portfolio level monitoring of risk concentrations in
certain economic sectors and customer segments was given a high priority. In the financial risk area, while maintaining a
limited exposure to market risk, a proactive limit review process and ensuring solid liquidity management were given high
attention.
During the year, deeper integration of internal-ratings-based (IRB) risk and capital measurement in the bank strategy
and business process continued. A new generation of credit risk models was developed to better evaluate the risks of
both new credit applicants as well as the existing portfolio. Relying on robust risk modelling allows a deeper under-
standing of underlying risks in new credit selections and portfolio monitoring to avoid excessive risk taking and more
accurately reflect risk aspect when setting credit standards and defining capital requirement for risk-weighted assets.
Regular stress testing of the credit portfolio and financial risks has been conducted as part of the capital budgeting process
in order to secure sufficient capitalization. This includes forecasting future earnings and risk exposures, market trends and
other relevant conditions and also follows regulatory standards set for the internal capital adequacy assessment process
(ICAAP).
In 2007 a high priority was given to ensuring compliance with the new regulatory requirements in anti-money laundering
(AML), investment services and other areas. In the AML area, special emphasis was put on developing well-functioning
know-your-customer processes and ensuring compliance with reporting requirements on suspicious transactions in the
Group’s Russian unit. After temporary regulatory limitations on banking operations in Russia, the operations resumed
quickly and with a higher level of confidence in meeting compliance requirements.
As a market leader in electronic channels, proactive assessment, monitoring and professional handling of IT risks are
core priority areas for the bank. Against a background of rapid evolution in technology, our goal is to minimize technology
related risks for the customer as well as for the bank. In 2007, we demonstrated our ability to proactively handle adverse
external risk developments in the IT risk area.
As the cornerstone for the organisation’s long-term success is sound risk culture, putting emphasis on increasing risk
awareness and expanding risk knowledge continued throughout last year’s risk management activities. Developing
effective risk governance and communicating the roles and responsibilities of organisational units to ensure an efficient
risk management process is the key to maintaining competitive advantage.
RISK MANAGEMENT PRINCIPLES AND ORGANISATION
The general risk management principles of Hansabank Group have remained unchanged with the main objectives of pre-
venting significant losses that would adversely affect the Bank’s equity and minimizing deviation from set business targets.
These principles include the following:
• Every business unit bears full responsibility for risks generated in its operations.
• The bank’s business operations are founded on long-term relations with its clients. Every employee must know his/
her counterpart and fully understand each individual transaction.
• All material risks are identified, quantified, analyzed and reported.
• Proper valuation of assets is key to secure against consequences of risks. High quality risk measurement methodology
is key to sound risk control.
58
• Being proactive – identification and elimination of causes of risks. Undesirable or too high risks are prevented or mitigated.
• The principle of duality (four eyes) is the basic principle of managing risks.
• Separation of functions – risk management and control functions are organisationally separated from business manage-
ment.
The Hansabank Board holds overall responsibility for identifying and regularly assessing all risks involved in the bank’s
activities and ensuring the monitoring and control of the extent of such risks as well as the organisation of the bank’s
risk management system. The Board has delegated the responsibility for managing different types of risks to respective
units of the bank as well as to risk committees. Together with group risk management division, the Board establishes
risk appetite, risk management standards and maximum risk tolerance limits for the Group.
The Chief risk officer (CRO) is responsible for management of the bank’s performance through:
• Defining and communicating risk appetite of the bank;
• Developing and maintaining systematic risk management framework;
• Promoting sound risk culture, accountability and effective governance.
The CRO manages the overall risk management function in the Group. Throughout the CRO organization all risk func-
tions have independent managers who are separate from business units. Risks taken in the various sub-divisions are
decided by local risk committees in accordance with authorized limits. These committees consist of members of the local
units’ senior management and representatives of the risk management team. In the case of insignificant risks, individual
decision making competencies are applied.
The main responsibilities of the Group Risk Management function include:
• Developing of risk policies, classification and measurement standards;
• Monitoring and reporting of risk tolerance and risk profile of the bank to the Board, Council and throughout the
organisation;
• Providing risk mitigation measures to protect capital and reputation of the bank;
• Monitoring of risk and control environment, training and risk awareness communication;
• Ensuring efficient risk decision making process.
Detailed information about credit, financial and operational risks is provided in Notes 46 to 48 to these financial state-
ments.
59
Note 6. Interest Income, net
In millions of euros, for the year 2007 2006
Interest income
For financial assets that are at fair value through P/L:
Securities portfolio 26.4 17.5
Derivatives 54.4 13.4
For financial assets that are not at fair value through P/L:
Loans 948.8 523.0
Bank deposits and loans 26.0 22.7
Correspondent accounts 57.5 38.7
Leasing 205.1 139.9
Factoring 29.4 20.7
Securities portfolio 5.6 6.4
Total interest income 1,353.2 782.3
Interest expenses
For financial liabilities that are at fair value through P/L:
Derivatives 45.6 10.6
For financial liabilities that are not at fair value through P/L:
Deposits 224.7 141.7
- Demand deposits 81.6 54.5
- Time deposits 107.4 62.7
- Guarantee Fund 35.7 24.5
Bank deposits and loans 382.8 146.3
Securities issued 37.4 33.3
Total interest expense 690.5 331.9
Interest income, net 662.7 450.4
Net interest margin % 2.97% 2.89%
Interest on impaired loans 5.6 2.9
60
Note 7. Fees and Commissions, net
In millions of euros, for the year 2007 2006
Fee and commission income
From financial assets that are at fair value through P/L:
Cash services 14.2 13.0
Transfers 45.5 40.4
Brokerage 21.8 14.5
From financial assets that are not at fair value through P/L:
Loan management and guarantees 22.9 17.1
Leasing 0.8 0.9
Factoring 8.0 7.1
Bank cards 91.8 71.5
Other e-channels 7.9 6.5
Custody 9.2 6.4
Asset management 24.0 13.3
Insurance brokerage 6.6 8.1
Other 19.0 17.8
Total fee and commission income 271.7 216.6
Fee and commission expense
From financial liabilities that are at fair value through P/L:
Encashment and cash services 9.7 7.7
Securities transaction fees 9.3 6.1
From financial liabilities that are not at fair value through P/L:
Settlements 7.1 6.5
Loan management and guarantees 2.5 2.0
Card services 30.6 21.7
Other 9.1 6.8
Total fee and commission expense 68.3 50.8
Fees and commissions, net 203.4 165.8
Note 8. Net Financial Gains and Losses
In millions of euros, for the year 2007 2006
FX and debt securities 73.9 54.7
Equities, options, futures 9.6 7.7
Dividends 5.8 4.6
Total net trading income 89.3 67.0
Trading and derivatives
Shares 9.4 20.9
of which, change in value 3.6 16.3
of which, dividend 5.8 4.6
Interest bearing instruments 6.0 -1.1
Other financial instruments 6.1 -8.8
Total trading and derivatives 21.5 11.0
Hedge accounting at fair value
Hedging instruments 0.5 –
Hedged item -0.5 –
Total – –
Change in exchange rates 67.8 56.0
Total financial gains and losses 89.3 67.0
61
Note 9. Interest Productivity of the Balance Sheet
In millions of euros, December 31 2007 2006
Average Interest Effective Average Interest Effective
balance and dividends interest rate balance and dividends interest rate
Assets
Cash 229.3 – – 189.7 – –
Due from Central Bank 1,342.3 28.4 2.12% 938.7 14.4 1.53%
Due from other financial institutions 1,276.0 55.1 4.32% 1,308.2 46.9 3.59%
Securities 1,329.1 60.2 4.53% 905.4 28.5 3.15%
Loans 17,590.8 1,169.7 6.65% 11,791.6 686.4 5.82%
Loans and overdraft* 14,384.7 935.2 6.50% 9,547.2 525.8 5.51%
Leasing & factoring 3,335.3 234.5 7.03% 2,336.6 160.6 6.87%
- Allowance for credit losses -129.2 – – -92.2 – –
Other assets 511.2 – – 443.7 – –
Total assets 22,278.7 1,313.4 5.90% 15,577.3 776.2 4.98%
Liabilities
Due to other financial institutions 8,809.8 382.8 4.35% 4,461.5 146.2 3.28%
Deposits** 9,907.1 224.7 2.27% 8,094.6 141.7 1.75%
Demand deposits 6,898.9 106.4 1.54% 5,788.2 71.3 1.23%
Time deposits 3,008.2 118.3 3.93% 2,306.4 70.4 3.05%
Debt securities issued to the public 880.0 37.4 4.25% 1,087.1 33.3 3.06%
Other liabilities and shareholders’ equity 2,681.8 – – 1,934.1 – –
Total liabilities and shareholders’ equity 22,278.7 644.9 2.89% 15,577.3 321.2 2.06%
Net interest income and earned dividends 668.5 455.0
*Interest income from loans and overdraft includes net interest income from derivative hedging portfolio
**The Guarantee Fund expense has been proportionally allocated to demand and time deposits
Note 10. Net Income from Insurance Activities
In millions of euros, for the year 2007 2006
Premiums written 134.6 93.2
Indemnities -27.2 -17.1
Change in provisions for insurance -84.6 -65.5
Total net income from insurance 22.8 10.6
Note 11. Other Operating Income
In millions of euros, for the year 2007 2006
Sale of property 1.2 0.6
Sale of equity investments 2.0 2.9
Rental income 2.2 1.6
Late penalty charges 11.2 7.4
Other 7.8 7.0
Total other operating income 24.4 19.5
62
Note 12. Personnel Expenses
In millions of euros, for the year 2007 2006
Salaries and compensations 127.1 96.4
Performance pay reserve 63.5 44.8
Social insurance charges 34.0 26.2
Training 7.6 4.4
Total personnel expenses 232.2 171.8
Salaries (incl. taxes) of the Board of AS Hansapank 1.7 1.7
Annual performance accrual (incl. taxes) of the Board of AS Hansapank 3.3 3.2
Number of employees, end of period** 9,574 8,449
Number of employees, average of the period** 9,214 7,921
** full-time equivalent
Note 13. Data Network Expenses
In millions of euros, for the year 2007 2006
Development 7.1 3.4
Maintenance 16.5 14.4
Software 1.2 0.5
Hardware 8.2 6.7
Total data network expenses 33.0 25.0
Note 14. Administrative Expenses
In millions of euros, for the year 2007 2006
Office expenses 34.0 24.5
Transportation, car lease 2.8 2.5
Supplies 7.6 6.0
Communications 7.4 6.8
Professional services 16.7 11.5
Insurance 1.6 1.4
Security 4.7 3.7
Other 0.3 0.4
Total administrative expenses 75.1 56.8
Note 15. Operating Lease Arrangements
In millions of euros, for the year 2007 2006
Non-cancellable operating leases:
within 1 year 1.9 4.9
1 to 5 years 3.7 4.2
over 5 years 4.4 1.2
Total operating lease arrangements 10.0 10.3
Note 16. Other Expenses
In millions of euros, for the year 2007 2006
Business trips 3.9 3.6
Marketing 17.3 14.3
Promotion 7.1 5.6
Other 16.9 33.2
Total other expenses 45.2 56.7
63
Note 17. Depreciation, Amortisation and Impairment Losses
In millions of euros, for the year 2007 2006
Property 4.2 3.8
Equipment, furniture and fittings 15.0 13.1
Intangible assets 1.4 1.1
Total depreciation, amortisation and impairment losses 20.6 18.0
Note 18. Income Tax Expense
In millions of euros, for the year 2007 2006
Estonia Latvia Tax % Lithuania Tax % Russia Tax % Total Total
Profit before tax 207.4 167.8 – 144.5 – 16.0 – 535.7 353.3
Effect of tax rates in foreign jurisdictions – 25.2 15.0% 26.0 18.0% 3.8 24% 55.0 30.6
Non-deductible expenses – 3.7 2.2% 13.6 9.4% 0.5 3% 17.8 16.9
Non-taxable income and tax incentives – -5.2 -3.1% -14.6 -10.1% – 0% -19.8 -14.1
Effect of tax losses utilised – - 0.0% – 0.0% – 0% – -2.7
Exchange differences – -0.1 -0.1% – 0.0% – 0% -0.1 –
Total tax expense charge to income statement – 23.6 14.1% 25.0 17.3% 4.3 26.9% 52.9 30.7
Current tax expense – 23.6 – 25.0 – 4.3 – 52.9 30.7
Deferred tax expense relating to the origination
and reversal of temporary differences (note 41)
– 0.2 – – – -0.9 – -0.7 -1.0
Total tax expense charge to income statement – 23.8 – 25.0 – 3.4 – 52.2 29.7
Note 19. Earnings per Share
December 31 2007 2006
Net profit attributable to shareholders (EUR in millions) 483.5 323.5
Weighted average number of shares (in millions) 317.1 317.1
Basic earnings per share (EUR) 1.52 1.02
Net profit attributable to shareholders (EUR in millions) 483.5 323.5
Weighted average number of shares (in millions) 317.1 317.1
Weighted average number of shares for diluted earnings per share (in millions) 317.1 317.1
Diluted earnings per share (EUR) 1.52 1.02
Note 20. Analysis of Financial Assets and Financial Liabilities by Measurement Basis
In millions of euros, December 31 2007
Designated
Held for trading Held to maturity Available for sale Amortised cost Total book value
at fair value
Assets
Cash – 280.8 – – – 280.8
Due from financial institutions – 1,270.8 – – 2,236.3 3,507.1
Loans – – – – 20,013.1 20,013.1
Debt securities 40.8 859.1 133.0 – – 1,032.9
Equity securities 70.0 2.1 – 0.1 3.7 75.9
Fund participations 24.3 280.9 – – – 305.2
Derivatives 77.0 – – – – 77.0
Total financial assets 212.1 2,693.7 133.0 0.1 22,253.1 25,292.0
Total non-financial assets – – – – – 534.2
Total assets 212.1 2,693.7 133.0 0.1 22,253.1 25,826.2
64
Analysis of Financial Assets and Financial Liabilities by Measurement Basis
In millions of euros, December 31 2007
Designated
Held for trading Held to maturity Available for sale Amortised cost Total book value
at fair value
Liabilities
Deposits – – – – 12,076.2 12,076.2
Correspondent accounts – – – – 114.4 114.4
Loans – – – – 9,749.5 9,749.5
Debt securities – – – – 842.7 842.7
Derivatives 28.9 – – – – 28.9
Other financial liabilities 0.4 – – – – 0.4
Total financial liabilities 29.3 – – – 22,782.8 22,812.1
Total non-financial liabilities - – – – – 3,014.1
Total liabilities 29.3 – – – 22,782.8 25,826.2
Note 21. Due from Other Financial Institutions
In millions of euros, December 31 2007 2006
Correspondence accounts 846.1 661.8
Loans 101.7 84.7
Deposits 703.5 227.1
Securities purchased under resale agreements 585.0 515.0
Total due from other financial institutions 2,236.3 1,488.6
Note 22. Financial Assets Held for Trading
In millions of euros, December 31 2007 2006
Government bonds 27.1 29.9
Debt securities 13.7 19.8
Fund participations 24.3 13.3
Equity securities 70.0 99.8
Derivatives 77.1 27.9
Total trading securities 212.2 190.7
Note 23. Financial Assets Designated at Fair Value through Proﬁt/Loss
In millions of euros, December 31 2007 2006
Government bonds 49.8 409.6
Debt securities 809.3 269.5
Fund participations 281.0 137.7
Equity securities 2.1 0.5
Total financial assets designated at fair value 1,142.2 817.3
Note 24. Available for Sale Securities
In millions of euros, December 31 2007 2006
Strategic investments 0.1 0.1
Total available-for-sale financial assets 0.1 0.1
65
Note 25. Held-to-maturity Securities
In millions of euros, December 31 2007 2006
Government bonds 125.7 115.4
Debt securities 7.3 6.6
Total held-to-maturity investments 133.0 122.0
Note 26. Shares and Participations of Hansabank
December 31 2007
Bank’s voting Original Acquisition value, EUR mil
Country No. of shares Nominal value
power (%) currency 2007 2006
Subsidiaries
A/S Hansabanka Latvia 100 406,043,114 1 LVL 593.8 280.6
AB bankas Hansabankas Lithuania 100 56,971,200 10 LTL 188.6 188.6
OAO Swedbank Russia 100 28,000,000 100 RUB 84.6 84.6
AS Hansa Capital Estonia 100 200,001 100 EEK 3.8 1.3
AS Hansa Elukindlustus Estonia 100 4,693,980 10 EEK 3.1 3.1
AS Hansa Investeerimisfondid Estonia 100 46,950 1,000 EEK 3.0 3.0
OÜ Crebit Estonia 100 1 450,000 EEK 3.7 3.7
AS Hansa Varakindlustus Estonia 100 469,400 100 EEK 5.2 3.2
Associated companies
Pankade Kaardikeskuse AS Estonia 47.9 7,900 1,000 EEK 0.2 0.2
AS Sertifitseerimiskeskus Estonia 25 64 100,000 EEK 1.0 1.0
OÜ TiedoEnator Support Estonia 20 100 10,000 EEK – –
Strategic investments*
S.W.I.F.T. Belgium n/a 79 125 EUR 0.1 0.1
AS Tallinna Börs Estonia 13.2 360 10,000 EEK – –
DP Hansa Leasing Ukraine (under liquidation) Ukraine 100 1 92,500 UAH – –
OÜ X-Marketing (under liquidation) Estonia 100 1 40,000 EEK – –-
* - investments over EEK 0.5 million
Subsidiaries of AS Hansa Capital
AS Hansa Liising Eesti Estonia 100 762,500 100 EEK 4.8 4.8
AS Hansa Leasing Russia Estonia 100 37,550,000 10 EEK 24.0 24.0
Balti Autoliisingu AS Estonia 100 14,000 100 EEK 0.1 0.1
Balti Kindlustusmaakleri OÜ (under liquidation) Estonia 100 1 1,100,000 EEK 0.1 0.1
Hansa Leasing Ltd Russia 100 550,000,000 1 RUB 15.1 15.1
Hansa Leasing Kaliningrad Ltd Russia 100 60,000,000 1 RUB 1.7 1.7
Subsidiaries of A/S Hansabanka
SIA Hansa Lizings Latvia 100 1 1,857,895 LVL 10.0 10.0
SIA Hansabankas Centrala eka Latvia 100 64 1,000 LVL 0.1 0.1
SIA Baltijas Autolizings Latvia 100 25,500 10 LVL 0.1 0.1
SIA Hansa Apdrošinašanas Brokeris Latvia 100 600 100 LVL – –
AS IPS Hansa Fondi Latvia 100 4,350 100 LVL 0.5 0.5
AS Hansa atklatais pensiju fonds Latvia 100 200,000 1 LVL 0.3 0.3
Subsidiaries of AB bankas Hansabankas
UAB Hansa Lizingas Lithuania 100 155,539 100 LTL 5.6 5.6
.
UAB Hansa gyvybes draudimas Lithuania 100 100,000 100 LTL 18.4 18.4
UAB Hansa Investiciju, valdymas Lithuania 100 3,800 1,000 LTL 1.6 1.6
UAB Baltijos Autolizingas Lithuania 100 1,000 10 LTL 1.5 1.5
UADBB Hansa Draudimo Brokeris (sold in 2007) Lithuania 100 200 1,000 LTL – 0.6
UAB Hansa Valda Lithuania 100 2,000 100 LTL 0.6 0.6
UADBB”HDB” Lithuania 100 520 100 LTL – –
66
Note 27. Prepayments and Accrued Interest
In millions of euros, December 31 2007 2006
Prepayments to state budget 16.3 31.4
Accrued interest receivable 74.7 47.5
Prepayments to companies 151.9 132.3
Receivables 33.2 24.4
Other 6.4 4.2
Total prepayments and accrued interest 282.5 239.8
Note 28. Loans
Distribution of Loans by Product
In millions of euros, December 31 2007 2006
Loans 15,553.2 11,523.9
Finance leases 3,237.7 2,506.1
Overdraft 713.7 486.3
Factoring 444.2 358.0
Repos 220.6 16.0
Gross lending to customers 20,169.4 14,890.3
Specified loan-loss allowance -156.3 -108.0
Net lending to customers 20,013.1 14,782.3
Geographic Distribution of Loans
In millions of euros, December 31 2007 2006
Estonia 7,533.9 6,023.7
Latvia 6,032.9 4,486.8
Lithuania 5,377.1 3,687.0
OECD 227.8 21.0
Other 997.7 671.8
Gross lending to customers 20,169.4 14,890.3
Specified loan-loss allowance -156.3 -108.0
Net lending to customers 20,013.1 14,782.3
Loan Portfolio by Sectors
In millions of euros 2007 % 2006 %
Individuals 8,140.2 40.4% 5,794.8 38.9%
Student Loans 180.4 0.9% 171.2 1.1%
Wholesale and retailing 1,841.8 9.1% 1,508.6 10.1%
Industry 1,847.4 9.2% 1,434.4 9.6%
Real estate management 3,249.9 16.1% 2,408.6 16.2%
Transport and communications 1,177.6 5.8% 957.8 6.4%
Energy 186.7 0.9% 169.6 1.1%
Municipalities and government 111.1 0.6% 60.3 0.4%
Agriculture and forestry 435.4 2.2% 335.1 2.3%
Construction 609.3 3.0% 530.7 3.6%
Hotels and restaurants 329.0 1.6% 306.4 2.1%
Finance and insurance 235.6 1.2% 51.1 0.3%
Other business services 1,557.1 7.7% 981.8 6.6%
Other 267.9 1.3% 179.9 1.2%
Total 20,169.4 100.0% 14,890.3 100.0%
67
Finance Lease Distribution by Maturity
In millions of euros, December 31 2007 2006
Leasing portfolio distribution by maturity
Up to 1 year 859.3 933.2
1 to 5 years 2,172.2 1,467.5
Over 5 years 206.2 105.4
Total finance leasing portfolio 3,237.7 2,506.1
Future periods’ interest income distribution by maturity
Up to 1 year 216.1 145.5
1 to 5 years 290.8 187.8
Over 5 years 32.0 26.1
Total finance leasing portfolio 538.9 359.4
Gross investment distribution by maturity
Up to 1 year 1,075.4 1,078.7
1 to 5 years 2,463.0 1,655.3
Over 5 years 238.2 131.5
Total gross investments 3,776.6 2,865.5
Note 29. Allowance for Credit Losses
Allowance for Credit Losses by Class of Financial Asset
In millions of euros Group Estonia Latvia Lithuania Russia
Balance, as of 31.12.06 109.1 37.6 26.1 36.9 8.5
Loan losses 48.2 20.3 16.7 7.1 4.1
Allowance for doubtful receivables 0.2 – – 0.2 –
Balance, as of 31.12.07 157.5 57.9 42.8 44.2 12.6
Loans Overdue
In millions of euros Group Estonia Latvia Lithuania Russia
Up to 30 days 798.1 230.7 235.3 332.1 –
31 to 60 days 37.9 18.8 13.5 5.6 –
Over 60 days 41.6 13.1 13.7 14.8 –
Total loans overdue, 31.12.06 877.6 187.1 115.6 328.7 –
Up to 30 days 1,099.6 264.4 352.8 482.4 –
31 to 60 days 60.7 18.5 24.4 17.8 –
Over 60 days 48.7 18.4 14.1 16.2 –
Total loans overdue, 31.03.07 663.7 171.2 142.6 349.9 –
Up to 30 days 1,324.9 317.6 415.3 586.9 5.1
31 to 60 days 95.9 52.3 25.7 17.9 –
Over 60 days 63.0 23.0 22.4 17.6 –
Total loans overdue, 30.06.07 1,483.8 392.9 463.4 622.4 5.1
Up to 30 days 1,418.1 300.2 303.9 814.0 –
31 to 60 days 75.6 29.4 28.3 17.9 –
Over 60 days 74.8 25.8 27.5 20.2 1.3
Total loans overdue, 30.09.07 1,568.5 355.4 359.7 852.1 1.3
Up to 30 days 1,445.9 333.2 481.7 630.8 0.2
31 to 60 days 102.9 49.8 40.1 11.4 1.6
Over 60 days 101.1 34.9 38.7 27.2 0.3
Total loans overdue, 31.12.07 1,649.8 417.9 560.5 669.4 2.0
68
Allowance for Loan Losses
In millions of euros Group Estonia Latvia Lithuania Russia
Balance, as of 31.12.06 108.0 37.6 26 35.9 8.5
Write-offs -1.8 -0.6 -0.7 -0.5 –
Loan losses 13.2 3.5 6.8 1.9 1.0
Effect of exchange rate changes -0.2 – -0.2 – –
Balance, as of 31.03.07 119.2 40.5 31.9 37.3 9.5
Write-offs -2.4 -0.8 -1.0 -0.6 –
Loan losses 10.4 2.2 4.9 2.2 1.1
Effect of exchange rate changes 0.1 – 0.1 – –
Balance, as of 30.06.07 127.3 41.9 35.9 38.9 10.6
Write-offs -2.7 -1.2 -0.9 -0.6 –
Loan losses 15.1 6.9 4.7 3.8 -0.3
Effect of exchange rate changes -0.4 – -0.2 – -0.2
Losses transferred from / to other instruments -0.1 – – -0.1 –
Balance, as of 30.09.07 139.2 47.6 39.5 42.0 10.1
Write-offs -8.6 -1.5 -6.4 -0.7 –
Loan losses 25.3 11.8 9.2 1.8 2.5
Effect of exchange rate changes 0.5 – 0.5 – –
Losses transferred from / to other instruments -0.1 – – -0.1 –
Balance, as of 31.12.07 156.3 57.9 42.8 43.0 12.6
Write-off by Industries
In millions of euros 2007 2006
Industry 1.1 4.6
Construction 0.1 –
Private individuals 5.6 2.6
Retail and wholesale 4.4 0.3
Service 0.8 0.2
Agriculture, forestry 0.3 0.1
Other 3.2 1.5
Total 15.5 9.3
Note 30. Other Assets
In millions of euros, December 31 2007 2006
Amounts under clarification 0.3 2.3
Amounts in transit 75.7 53.8
Due from insurance activities 3.9 1.5
Deferred income tax 2.0 1.1
Other 5.8 5.0
Total other assets 87.7 63.7
69
Note 31. Tangible Assets
Equipment
In millions of euros, December 31 Land Buildings and other* Construction Total
2007
Cost
Balance at the beginning of the year 4.4 91.3 109.2 2.3 207.2
Additions – 7.5 33.8 4.0 45.3
Reclassification – 5.2 -4.6 -0.6 –
Disposals – -2.7 -9.9 – -12.6
Write-offs – -0.2 -3.4 -0.1 -3.7
Effect of movements in foreign exchange – – -0.1 – -0.1
Balance at the end of the year 4.4 101.1 125.0 5.6 236.1
Depreciation
Balance at the beginning of the year – 22.7 69.6 – 92.3
Depreciation charge for the year – 4.2 15.0 – 19.2
Reclassification – 0.8 -0.8 – –
Disposals – -0.6 -5.8 – -6.4
Write-offs – -0.2 -3.0 – -3.2
Balance at the end of the year – 26.9 75.0 – 101.9
Net book value
Balance at the beginning of the year 4.4 68.6 39.6 2.3 114.9
Balance at the end of the year 4.4 74.2 50.0 5.6 134.2
2006
Cost
Balance at the beginning of the year 0.6 89.7 99.4 0.8 190.5
Additions 0.1 2.8 24.4 2.2 29.5
Reclassification 3.7 0.1 -3.7 -0.1 –
Disposals – -1.1 -8.9 -0.6 -10.6
Write-offs – -0.2 -2.0 – -2.2
Balance at the end of the year 4.4 91.3 109.2 2.3 207.2
Depreciation
Balance at the beginning of the year – 19.5 62.2 – 81.7
Depreciation charge for the year – 3.8 13.1 – 16.9
Disposals – -0.3 -4.2 – -4.5
Write-offs – -0.1 -1.6 – -1.7
Effect of movements in foreign exchange – -0.2 0.1 – -0.1
Balance at the end of the year – 22.7 69.6 – 92.3
Net book value
Balance at the beginning of the year 0.6 70.2 37.2 0.8 108.8
Balance at the end of the year 4.4 68.6 39.6 2.3 114.9
70
Note 32. Intangible Assets
In millions of euros, December 31 Goodwill Licences Total
2007
Cost
Balance at the beginning of the year 26.7 18.5 45.2
Additions – 2.4 2.4
Disposals – -0.4 -0.4
Balance at the end of the year 26.7 20.5 47.2
Amortisation
Balance at the beginning of the year – 16.6 16.6
Amortisation charge for the year – 1.4 1.4
Disposals – -0.4 -0.4
Balance at the end of the year – 17.6 17.6
Net book value
Balance at the beginning of the year 26.7 1.9 28.6
Balance at the end of the year 26.7 2.9 29.6
2006
Cost
Balance at the beginning of the year 26.0 17.2 43.2
Additions – 1.5 1.5
Disposals – -0.2 -0.2
Addition through minority acquisition 0.7 – 0.7
Balance at the end of the year 26.7 18.5 45.2
Amortisation
Balance at the beginning of the year – 15.6 15.6
Amortisation charge for the year – 1.1 1.1
Disposals – -0.1 -0.1
Balance at the end of the year – 16.6 16.6
Net book value
Balance at the beginning of the year 26.0 1.6 27.6
Balance at the end of the year 26.7 1.9 28.6
Note 33. Pledged Financial Assets
In millions of euros, December 31 2007 2006
Compulsory reserve in the Central Bank 435.6 370.4
Trade finance – 0.1
Repos – 0.5
Total pledged assets 435.6 371.0
71
Note 34. Due to Other Financial Institutions
In millions of euros, December 31 2007 2006
Correspondent accounts 114.4 112.9
Deposits 1,162.9 553.7
Loans 9,229.0 5,779.2
Subordinated loans 520.5 300.0
Total due to other financial institutions 11,026.8 6,745.8
Note 35. Geographical Distribution of Deposits
In millions of euros, December 31 Estonia Latvia Lithuania Russia Group
2007 2006 2007 2006 2007 2006 2007 2006 2007 2006
Demand deposits
Public sector 16.2 14.1 15.5 19.6 320.5 357.8 – – 352.2 391.5
Corporate customers 756.8 741.8 522.7 583.8 406.6 403.4 33.9 25.1 1,720.0 1,754.1
Private individuals 1,073.0 1,072.0 646.9 707.9 1,391.9 1,175.2 7.2 2.5 3,119.0 2,957.6
Total demand deposits 1,846.0 1,827.9 1,185.1 1,311.3 2,119.0 1,936.4 41.1 27.6 5,191.2 5,103.2
Overnight deposits*
Public sector 43.7 57.7 3.4 0.6 41.5 29.0 – – 88.6 87.3
Corporate customers 1,074.5 1,040.6 380.6 269.8 212.5 107.9 – – 1,667.6 1,418.3
Private individuals 73.9 68.8 75.1 59.0 0.8 – – – 149.8 127.8
Total overnight deposits 1,192.1 1,167.1 459.1 329.4 254.8 136.9 – – 1,906.0 1,633.4
Time deposits
Public sector 156.4 63.2 5.8 0.3 34.8 3.0 – – 197.0 66.5
Corporate customers 717.7 447.6 140.2 88.9 78.4 45.6 2.4 5.5 938.7 587.6
Private individuals 878.5 640.6 654.4 480.0 1,146.0 818.5 1.5 0.4 2,680.4 1,939.5
Total time deposits 1,752.6 1,151.4 800.4 569.2 1,259.2 867.1 3.9 5.9 3,816.1 2,593.6
Total deposits 4,790.7 4,146.4 2,444.6 2,209.9 3,633.0 2,940.4 45.0 33.5 10,913.3 9,330.2
*In the balance sheet overnight deposits are recorded as part of demand deposits.
Note 36. Other Financial Liabilities
In millions of euros, December 31 2007 2006
Debt securities issued 842.7 995.6
Derivatives 28.9 27.2
Other securities liabilities 0.4 1.2
Total financial liabilities 872.0 1 024.0
Note 37. Debt Securities Issued
December 31 Year of issue Maturity Currency Amount in EUR mil Interest rate
Debt security 2007 2006
MTN 5.10.2004 19.10.2009 EUR 750.0 750.0 EURLB3M
MTN 12.5.2004 18.5.2007 EUR – 47.0 EURLB3M
MTN 23.2.2004 27.2.2007 SEK – 33.1 SES3M
MTN 19.1.2005 19.1.2007 EUR – 50.0 EURLB3M
MTN 21.1.2005 21.1.2009 EUR 50.0 49.9 3,0
MTN various various various 10.0 10.0 –
Other various various various 32.7 55.6 variable
Debt securities issued by Hansabank 842.7 995.6
*MTN – Euro Medium-term Notes
72
Note 38. Accrued Liabilities
In millions of euros, December 31 2007 2006
Prepayments received 99.9 88.6
Unpaid interest 132.6 71.0
Short-term debt 166.4 112.0
Payables 26.2 46.2
Total accrued liabilities 425.1 317.8
Note 39. Other Liabilities
In millions of euros, December 31 2007 2006
Outgoing payment orders 170.2 199.6
Incoming payment orders 28.3 9.0
Clearing accounts 25.2 8.4
Liabilities from insurance activities 3.0 1.5
Other 61.0 43.0
Total other liabilities 287.7 261.5
Note 40. Provisions
In millions of euros, December 31 2007 2006
Technical provisions in insurance 394.6 272.5
Incl. unearned premiums 183.5 163.9
claims outstanding 10.1 4.9
unit-linked provisions 201.0 103.7
Provision for operational risk 9.4* 16.3
Provision for guarantees 8.9 5.3
Total reserves 412.9 294.1
* Change due to reversal of Russian VAT provision
Note 41. Deferred Tax Balances
Deferred tax assets (liabilites) arise from the following (closing balances)
In millions of euros, December 31 2007 2006
Latvia Lithuania Russia Total Total
Deferred tax assets
Provisions for vacations 0.3 0.1 – 0.4 0.2
Taxable losses carried forward – 12.0 2.0 14.0 15.2
Other provisions 0.1 2.0 – 2.1 1.1
Total deferred tax assets 0.4 14.1 2.0 16.5 16.5
Deferred tax liabilities
Difference in depreciation rates -1.3 -0.6 – -1.9 -2.7
Total deferred tax liabilities -1.3 -0.6 – -1.9 -2.7
Unrecognised deferred tax asset – -14.1 – -14.1 -15.2
Total deferred tax asset (liability), net -0.9 -0.6 2.0 0.5 -1.4
Deferred tax balances
At the beginning of the year -1.9 -0.6 1.1 -1.4 -2.4
Change in deferred tax (note 18) -0.2 – 0.9 0.7 -0.1
Total deferred tax liabilities -2.1 -0.6 – -2.7 -2.5
Total deferred tax assets – – 2.0 2.0 1.1
73
Note 42. Capital
Share Capital
December 31 2007 2006
Number EUR mil Number EUR mil
Authorised
Ordinary shares, each of 10 EEK 317,368,436 202.8 317,368,436 202.8
Issued and fully paid for
Ordinary shares, each of 10 EEK 317,368,436 202.8 317,368,436 202.8
Reserves of the Group
In millions of euros, December 31 2007 2006
General banking reserve 21.8 21.8
Statutory reserve 33.9 27.9
Other reserves – 6.4
Total reserves 55.7 56.1
Capital Structure of the Group
In millions of euros, December 31 2007 2006
Primary capital (Tier 1)
Share capital 202.8 202.8
Share premium 32.2 32.2
Reserves 55.7 56.1
Retained earnings from previous periods 1,131.2 812.2
Retained earnings from current period 483.5 323.5
Revaluation differences -22.1 -16.1
Less: Intangible assets (note 32) -29.6 -28.6
Total Tier 1 1,853.7 1,382.1
Supplementary capital (Tier 2) 500.0 300.0
Own funds, total 2,353.7 1,682.1
Own funds, net 2,353.7 1,682.1
Capital Ratios of the Group
Per cent, December 31 2007 2006
Tier 1 capital ratio* 8.60 8.66
Tier 2 capital ratio* 2.32 1.88
Total capital ratio 10.92 10.54
Tier 1 leverage ratio ** 7.18 7.13
Common stock to total assets 0.79 1.05
Common equity to total assets 7.29 7.27
* Tier 1 / Tier 2 capital divided by total risk-weighted on- and off-balance sheet items.
** Tier 1 capital divided by total assets.
74
Asset Structure of the Group
In millions of euros, December 31 2007 2006
Nominal Risk-weighted Nominal Risk-weighted
Cash 280.8 – 236.2 –
Due from Central Bank 1,270.8 – 1,304.6 –
Due from other financial institutions 2,236.3 345.9 1,488.6 232.9
Securities 1,491.2 133.7 1,133.1 83.1
Net loans 20,013.1 18,353.2 14,782.3 13,790.8
Other assets 370.2 164.9 303.5 141.0
Tangible assets 134.2 134.2 114.9 114.9
Intangible assets 29.6 – 28.6 –
Total assets 25,826.2 19,131.9 19,391.8 14,362.7
Distribution of assets by risk categories
I category 4,103.6 – 3,472.5 –
II category 1,769.6 353.9 929.7 185.9
III category 2,350.0 1,175.0 1,625.6 812.8
IV category 17,603.0 17,603.0 13,364.0 13,364.0
Total assets 25,826.2 19,131.9 19,391.8 14,362.7
Off-balance sheet items 8,291.4 1,349.0 9,355.6 1,017.0
Capital requirement for covering the risks of the trading book 995.9 38.4 823.9 22.1
Open net currency position 589.3 58.9 308.2 30.8
Note 43. Derivative Financial Instruments
In millions of euros, December 31 2007 2006
Contractual/ Contractual/
Fair values Fair values
notional amount notional amount
Total** Assets Liabilities Total** Assets Liabilities
Foreign exchange derivatives
Forward exchange contracts 145.3 0.2 -1.6 195.4 0.8 -0.5
Currency swaps 1,943.1 5.7 -9.7 4,627.0 5.0 -3.1
OTC* options bought and sold 239.9 0.6 -0.5 312.6 0.9 -0.8
Other 100.9 0.3 -0.1 143.4 0.2 -0.1
Total FX derivatives 2,429.2 6.8 -11.9 5,278.4 6.9 -4.5
Interest rate derivatives
Swaps 1,078.1 13.2 -0.9 149.6 0.9 -1.2
incl.hedges 1,008.2 12.5 – 73.5 0.8 –
OTC* options bought and sold 1.9 – – 16.6 0.1 -0.1
Other 33.3 – – 320.2 0.1 -0.1
Total interest rate derivatives 1,113.3 13.2 -0.9 486.4 1.1 -1.4
Equity and other derivatives
Futures 175.5 3.1 -2.8 338.2 6.6 -6.0
OTC* options bought and sold 847.7 53.9 -13.3 249.0 13.3 -15.4
Total equity and other derivatives 1,023.2 57.0 -16.1 587.2 19.9 -21.4
Total derivatives 4,565.7 77.0 -28.9 6,352.0 27.9 -27.3
* over the counter
** Includes the sum of long and short notional amounts
The bank has designed a fair value hedge to eliminate the interest risk from fixed rate leasing and loan contracts which are funded from short-term deposits.
The hedging instruments are interest rate swaps (IRS) that transform fixed rate assets to variable rate assets which are naturally hedged with short-term deposits.
The hedging period is intended to match the maturity of the last hedging instrument.
75
Note 44. Financial Commitments and Guarantees
In millions of euros, December 31 2007 2006
Risk weighted Risk weighted
Nominal Credit equivalent Nominal Credit equivalent
amount amount
Guarantees 502.1 384.3 360.7 385.2 297.2 262.6
Undisbursed facilities 2,391.3 930.9 920.7 1,911.5 675.6 662.2
Letters of credit 49.1 24.5 24.3 81.5 40.7 40.1
Other 783.2 – – 625.4 – –
Total 3,725.7 1,339.7 1,305.7 3,003.6 1,013.5 964.9
Note 45. Fair Value of Financial Assets and Financial Liabilities
In millions of euros, December 31 2007 2006
Fair value Book value Fair value Book value
Investment securities 129.7 133.0 123.1 122.0
Loan portfolio 20,259.4 20,169.4 14,952.9 14,890.3
Debt securities issued 852.4 842.7 1,006.9 995.6
Time deposits 3,393.7 3,816.1 2,374.7 2,593.6
Note 46. Credit Risk
Credit risk refers to the risk that a counterpart is incapable of meeting its obligations and pledged assets do not cover the
claims. Credit risk includes concentration risk that includes large individual exposures as well as significant exposures to
groups of counterparts whose likelihood of default is driven by common underlying factors, such as the economy, sector,
geography, instrument type or other. Credit risk forms the largest part of the total outstanding risk for the Group and is
inherent in almost all regular credit products such as loans, leasing, credit cards, guarantees and derivatives.
Credit risk management is based on the Swedbank Group credit policy that sets common standards of credit activities
for all Group companies. The policy sets out the following principles:
• Credit must generally be serviced by cash flows from core activities;
• Risk and return from each client relationship must be balanced;
• In the case of significant credit the decision makers must have a deep understanding of the client’s credit-worthiness
and the purpose of the credit;
• Good credit history of the client is required.
The basis for credit risk management is the adequate assessment of a counterpart’s creditworthiness. As a principle,
counterparties involved in any considered transaction receive a risk rating before any relevant credit decision is made.
The risk rating is assigned by using a risk measurement system appropriate for the size and complexity of the counter-
party or transaction. The assessment of the counterparty is an important input in client relationship management – the
higher the client risk, the more attention is paid to their creditworthiness. After issuing a loan, the client’s credit solvency
and value of the collateral is continuously monitored. Risk ratings of existing exposures have to be updated with an
appropriate frequency, but at least once a year.
Due to the importance of ensuring that internal risk evaluations are consistent and accurately reflect the quality of indi-
vidual credit, the responsibility for overseeing evaluations below the significance level and setting individual ratings for
exposures above the significance level rest with an independent credit risk department.
In order to obtain an overview of the risks at portfolio level, risk management monitors and reports on portfolio devel-
opments as well as performing regular stress testing that focuses on the impact of various possible but low-probability
events on the capital adequacy of the bank. Such events include, among others, a possible increase in default rates due
to the changing conditions of the macroeconomic environment, industry-specific changes and possible defaults of the
largest exposures.
76
CREDIT RISK CLASSIFICATION AND MEASUREMENT
For the purposes of credit risk assessment, Hansabank portfolio is divided into five major exposure classes:
• Banking institutions are identified according to the counterpart type being a bank or a financial institution holding a
credit license awarded by the appropriate authority;
• Corporate clients - consolidated exposure in Hansabank exceeding 0.8m euros;
• Corporate SME clients - consolidated exposure in Hansabank between 0.2 – 0.8m euros;
• Retail SME (SSE) clients - size of exposure in Hansabank up to 0.2m euros;
• Private person exposures - owner of the credit contract is a private person.
Private person exposures are further classified according to product groups such as mortgages, revolving, leasing and
other exposures. For municipalities and sovereign exposures Hansabank uses a simplified approach whereby risks are
measured either through external credit agency risk assessments or on a portfolio basis.
Exposures in these asset classes receive an estimate of probability of default (PD) within a 12-month period. The PD estimate
refers to the probability of the counterparty being unable to repay the debt or payments being overdue on any significant
credit for more than 90 days. With the exception of banking institutions, exposures receive a Loss Given Default (LGD) esti-
mate that indicates the size of a loss assuming that default has taken place. Exposures are also assigned a Credit Conversion
Factor (CCF) estimate that indicates the share of unused credit amount that will be utilised at the moment of default. PD,
LGD and CCF estimates are key inputs to measure expected and unexpected losses in the Hansabank portfolio. These inputs
are used in several areas, including decision-making, client selection, pricing considerations, provisioning, determining
problem credits and regular monitoring.
INTERNAL RISK CLASSIFICATION SYSTEM (RCS) OF HANSABANK
The internal risk classification system of Hansabank is developed on the basis of group standard of Swedbank Group and
is subjected to regular validation. For SME, SSE and private person segments, both Application Scoring and Portfolio
Scoring is used.
The portfolio segments rated internally as part of the RCS are shown in Table 1.
Table 1. Risk rating systems in Hansabank Group across credit portfolios
Portfolio segment Definition Exposure class PD dimension LGD dimension CF dimension
Application Portfolio
Risk Classification System for Countries,
Credit institutions All Institutions – –
Bank Systems and Banks
Large corporates Exposure> € 0.8 mio Corporates Corporate Rating System – –
Corporate SMEs SME Application
Exposure> € 0.2 € 0.8 mio Corporates – –
(SMEs) Scoring System SME/SSE Portfolio
SSE Application Scoring System
Retail SMEs (SSEs) Exposure> € 0.2 mio Retail Retail LGD Models Retail CF Models
Scoring System
Application Scoring System Portfolio Scoring System
Private Individuals All Retail Retail LGD Models Retail CF Models
for Private Persons for Private Persons
Risk Classification System for Countries, Bank Systems and Banks
The Risk Classification System for Countries, Bank Systems and Banks is used for all exposures to credit institutions con-
cerning their default risk. It has been implemented since August 2006. The rating process is based on expert models
and resulting rating classes reflect through-the-cycle (TTC) PD estimates of the counterparties.
Risk rating system for large corporates
The Corporate Rating System has been implemented since 2001 in Estonia and 2002 in Latvia and Lithuania. The rating
process is based on expert models (combining assessments of quantitative and qualitative factors), whereas different models
have been developed for rating industrial and real estate companies. Assigned ratings comply with the TTC concept.
Application scoring system for medium-sized companies
SME Application scoring is performed when a SME customer applies for new credit. The system has been implemented
since 2003 in Estonia and 2004 in Latvia and Lithuania. In 2007 it was upgraded from expert model to hybrid models.
The outcomes of the models are Point-In-Time (PIT) PDs, which, if the through-the-cycle estimates are needed, are ad-
justed to produce TTC PD estimates.
77
Application scoring system for small-sized companies
The SSE Application Scoring System is used for assessing default risk of small-sized companies when they apply for new
credit. It has been integrated into the credit decision-making process since January 1, 2007 and during 2007 the system
was updated. SSE scoring is based on statistical models estimating PIT PDs, which, if the through-the-cycle estimates
are needed, are adjusted to produce TTC PD estimates.
Portfolio scoring system for small- and medium-sized companies
The SME/SSE Portfolio Scoring System is used for measuring the default risk of exposures to all SME and SSE counter-
parties already present in the credit portfolio and providing those inputs for capital requirement calculations, manage-
ment reporting and other purposes. The scoring is performed at client level on a monthly basis as an automated process
in Enterprise Data Warehouse. The system was deployed in 2006 and updated in 2007. SME/SSE portfolio scoring is
based on statistical models estimating PIT PDs, which, if the through-the-cycle estimates are needed, are adjusted to
produce TTC PD estimates.
Application Scoring System for Private Persons
The Application Scoring System for Private Persons is used for measurement of the default risk of credit applications
received from private individuals. The risk is estimated on a credit application level and is valid during the first 3 months
from the contract open date. The main part of the system was implemented in early 2007 and updated in 2007. The
outcomes of the models are PIT PDs, which, if the through-the-cycle estimates are needed, are adjusted to produce TTC
PD estimates.
Portfolio Scoring System for Private Persons
The Portfolio Scoring System for Private Persons is used for evaluation of the default risk of existing exposures to private
individuals on contract level, and providing those inputs for capital requirement calculations, management reporting etc.
The scoring is performed on a monthly basis as an automated process in Enterprise Data Warehouse. The system was de-
ployed in 2006 and updated in 2007. The outcomes of the models are PIT PDs, which, if the through-the-cycle estimates
are needed, are adjusted to produce TTC PD estimates.
Retail LGD Models
Retail LGD models are used to produce LGD estimates for all exposures to private individuals and SSE clients at contract
level. The scoring is performed on a monthly basis as an automated process in Enterprise Data Warehouse. The system
was deployed in 2006 and updated during 2007. The outcomes of the models are adjusted to produce downturn estimates
of LGDs.
Retail CF Models
Retail CF models are used to produce CF estimates for all contracts in retail portfolio (incl. exposures to private individuals
and SSE clients) that are allowed to have undrawn amounts. The scoring is performed on a monthly basis as an automated
process in Enterprise Data Warehouse. In 2007, an updated version of CF estimates was implemented.
Group’s Maximum Credit Risk Exposure
In millions of euros, December 31 2007
Group Estonia Latvia Lithuania Russia
Securities 1,122.3 22.6 215.4 884.3 0.0
Loans 20,169.4 7,748.8 6,051.2 5,374.4 995.0
Derivatives 77.0 53.8 6.3 16.9 0.0
Financial guarantees 551.2 264.2 148.3 131.3 7.4
Undisbursed facilities 3,174.6 965.0 945.0 1,153.8 110.8
Total 25,094.5 9,054.4 7,366.2 7,560.7 1,113.2
% of total 100.0% 36.1% 29.4% 30.1% 4.4%
78
Risk Concentration of Securities
In millions of euros, December 31 2007
Risk position Deduction Open risk % of own funds
Bayerische Landesbank 682.9 682.9 – 0.0%
Swedbank 388.1 387.9 0.2 13.4%
Citigroup 297.9 252.4 45.5 1.2%
Maxima 293.4 – 293.4 0.0%
Total 1,662.3 1,323.2 339.1 14.6%
Collaterals Held as Security and Other Credit Enhancements
In millions of euros 2007 % 2006 %
Mortgage 12,708.0 63.0% 9,391.0 63.1%
Registered pledge 1,539.4 7.6% 982.7 6.6%
Other movable pledge 2,249.7 11.2% 1,619.4 10.9%
Building, movable 258.7 1.3% 697.2 4.7%
State guarantee 194.8 1.0% 191.0 1.3%
Guarantee 706.2 3.5% 268.7 1.8%
Deposit 128.2 0.6% 103.0 0.7%
Securities 500.2 2.5% 153.4 1.0%
Other 715.9 3.5% 674.3 4.5%
No collateral 1,168.3 5.8% 809.6 5.4%
Total 20,169.4 100.0% 14,890.3 100.0%
Credit Risk Exposure on Loans by Geographic Areas
In millions of euros, December 31 2007
Book value before Collective Book value after Book value of
Specific allowance
allowance allowance allowance impaired fin.assets
Estonia 7,748.8 15.1 42.8 7,690.9 53.1
Latvia 6,051.2 12.0 30.8 6,008.4 58.1
Lithuania 5,374.4 10.9 32.1 5,331.4 17.8
Other 995.0 – 12.6 982.4 –
Total 20,169.4 38.0 118.3 20,013.1 129.0
% of total 100.0% 0.2% 0.6% 99.2% 0.6%
Credit Risk Exposure on Loans by Industry
In millions of euros, December 31 2007
Book value before Collective Book value after Book value of
Specific allowance
allowance allowance allowance impaired fin.assets
Individuals 8,320.6 11.1 32.8 8,276.7 33.5
Wholesale and retailing 1,841.8 0.8 14.0 1,827.0 3.1
Industry 1,847.4 10.6 15.3 1,821.5 17.4
Real estate management 3,249.9 9.6 14.3 3,226.0 49.8
Transport and communications 1,177.6 0.6 10.5 1,166.5 6
Energy 186.7 0.3 1.0 185.4 0.4
Municipalities and government 111.1 – 0.2 110.9 –
Agriculture and Forestry 435.4 2.0 3.0 430.4 6.9
Construction 609.3 0.6 5.9 602.8 2.3
Hotels and restaurants 329.0 0.2 1.5 327.3 1.4
Finance and insurance 235.6 – 0.2 235.4 –
Other business services 1,557.1 1.9 16.1 1,539.1 6.2
Other 267.9 0.3 3.5 264.1 2
Total 20,169.4 38.0 118.3 20,013.1 129.0
% of total 100.0% 0.2% 0.6% 99.2% 0.6%
79
Note 47. Financial Risks
Financial Risks arise when the Bank’s on- or off-balance sheet positions are exposed to changes in market risk factors
such as interest rates, currency exchange rates, securities or commodities prices. Liquidity risk is considered as a financial
risk when the Bank is unable to fulfil its short-term obligations without incurring significant additional cost.
Financial risk management is based on common risk taking and managing principles that are enforced by the Board and
Council in the form of well-communicated policies and principles that are uniform across all Group entities.
Financial risk portfolios have a low risk profile, all positions are limited and transparent and all financial risk components
are regulated, measured and related instruments covered with complete management instructions. Financial risks un-
dertaken are always weighed against expected returns.
Financial Risks are controlled by a separate organisational function that is fully independent of units that make decisions to
engage in Financial Risk taking.
ASSET-LIABILITY MANAGEMENT
The Group Asset-Liability Management Committee (ALMCO) is responsible for defining the risk profile and asset-liability
structure for the Group within risk limits allocated by Swedbank Group Finance Committee. The asset-liability management
is centralized, but subsidiary banks have certain independence within limits set by Group ALMCO. The committee sets
overall limits to value-at-risk (VaR), liquidity, asset-liability structure, capitalization, FX, Equity, interest rate and deriva-
tives positions.
Group Treasury executes everyday asset-liability management through liquidity, interest rate, maturity mismatch, capi-
talization and trading positions management. The Group’s Market Risk department independently monitors the Group’s
asset-liability risks and taken positions. The Financial Committee is responsible for setting limits on financial institutions,
absolute and VaR limits to the Group’s trading portfolios within ALMCO limits and approving market risk methodologies
and regulations. The committee also sets individual limits on products with inherent market risk.
LIQUIDITY RISK
Hansabank’s liquidity strategy incorporates support to subsidiaries in liquidity and capital management. The Group’s
liquidity is affected by the following factors:
• The need to fulfil clients’ short-term demands on cash and marketable securities.
• Access to capital markets.
• Ability to liquidate positions.
The ALMCO ensures that the Group’s liquid assets form at least 20% of its clients’ funds and the loan portfolio share in
total assets remains below 77%. Liquid assets include cash, funds in the Central Bank and highly liquid OECD government
bonds (realizable in 3 banking days). The following criteria are used to measure liquidity position:
• Assets and liabilities by maturities.
• Funding proportions.
• Marketability of assets.
• Unutilized credit-lines.
In addition to customer deposits, sources of funding include various money and capital market instruments. Short-term
instruments include overdraft and credit lines, inter-bank loans which range from overnight to three months, repo-agree-
ments, the possibility of liquidating short-term positions in treasury securities and clients’ deposits that have historically
been a stable funding source. Medium-term instruments include mainly bank loans with maturity of less than 5 years.
Long-term funding consists of bank loans with maturity of over 5 years, bonds and shareholders’ equity.
CURRENCY RISK
Currency risk arises from unfavourable movements in foreign exchange rates against the Estonian kroon (EEK). Group
Treasury manages currency risk based on the following limits:
• Open EUR position must be long at least 200 million euros.
• Open positions in EEK, LTL and LVL are unlimited due to pegging or basket-pegging (in Latvia) to EUR.
• Open position in OECD member currencies and currencies of countries that have signed a General Agreement to Borrow
with the IMF may not exceed 22 million euros or 15% of net own funds.
• Open position in any other currency (except EUR, LVL and LTL) may not exceed 16 million euros or 4% of net own funds.
80
INTEREST RATE RISK
Group Treasury manages interest rate risk based on the following limit:
• Interest sensitivity limit: in case of a +100bp parallel shift in all interest curves the decrease in the value of the Group’s
assets may not exceed 37 million euros (includes 10 million euro sub-limit for mark-to-market assets).
In addition, the interest income sensitivity analysis is used for interest rate risk management.
MARKET RISK
Exposure to Market Risks arises from positions that are affected by changes in market risk factors: interest/exchange
rates, prices of financial instruments and underlying securities. Responsibility for engagement in positions is undertaken
in units who have the mandate for market risk taking. All positions taken must have authorisation in the form of the risk
limits. All risk limits and exposures are measured and reported by organisationally independent Market Risk Management
department both at the Group and local business unit levels.
Market risk management guidelines are the following:
• Management of market risks is based on a Group-wide policy and Principles;
• All risk evaluation models are developed and updated centrally;
• Allocation of market risk limits is co-ordinated following the top-down principle and Group-wide risk concentration limits.
Technical management of market risks is centralized, i.e. all business units use a common IT platform for taking risk po-
sitions enabling real-time top-to-bottom risk monitoring.
Year 2007 was characterised by turbulence in the money markets, illiquidity and volatile equity markets. In this environment,
an active review of risk taking strategies and limit management was inducted to mitigate the impact of adverse market
developments.
RISK EVALUATION MODELS
VaR method is used in the evaluation of potential losses, which shows the maximum potential loss during one trading
day from a certain portfolio based on a 99% probability. The analysis is based on the risk factors’ historical one-year
non-weighted volatility. The option portfolios are limited by total portfolio open-delta limit and individual issuers limits.
Non-linear risk is also limited and measured on a daily basis by stress-testing.
Hansabank uses integrated Swedbank Group VaR calculation methodology. All instruments bearing interest rate or foreign
exchange risk are included in the VaR model and risk estimates are calculated on a daily basis and delivered to risk-taking
units across the Group. Equity related trading risks are evaluated by conservative internal risk estimation model by his-
torical volatilities of underlying instruments, without correlation of different positions.
Risk measurement and evaluation models are regularly benchmarked by back-testing by comparing daily revaluation of
profit/loss from positions with respective potential risk. The market risk department regularly reviews the evaluation
models used by the Group.
Sensitivity analysis
In millions of euros, December 31 Change 2007 2006
Net interest income, 12 months
Increased interest rates +1%p.p. 34.4 29.3
Decreased interest rates -1%p.p. -52.7 -44.6
Change in value
Market interest rate +1%p.p. -1.0 -2.5
-1%p.p. 1.0 2.6
Stock prices +10% -0.2 0.4
-10% -1.7 -1.0
Exchange rates +5% -124 14.3
-5% 124 -14.3
81
Note 48. Operational Risk
In accordance with operational risk policy, the Group seeks to maintain the lowest possible risk level, at the same time
aiming at not exceeding a reasonable cost level. The Group does not take any unmanageable or unlimited risks even if
these could result in improved earnings.
In carrying out transactions, specific limits and qualifications are set out in writing in the employee’s job description or
in a separate instruction. In order to reduce risks arising from human error and fraud, the Group applies the duality prin-
ciple, whereby transactions or operations have to be accepted by at least two independent employees.
Increasing every employee’s risk awareness is the basis of effective management of operational risks. Keeping the
responsibility for risk management in business units, increasing every employee’s risk awareness, and establishing a
strong control environment, have been the main means of preventing operational losses.
Since the end of 1999 Hansabank has used the internationally accepted method of the Control Self Assessment (CSA)
system to map and manage operational risk. According to CSA, identification, assessment and monitoring of risks is the
responsibility of business units, while risk management units have an advisory, consolidating and reporting role. In addi-
tion to self-assessment, credit control and branch network control functions operate to prevent risks. An IT-based control
and reporting system has been implemented in the branch network to improve the effectiveness of control activities.
The Group has implemented a business continuity management system that helps to mitigate losses from events that
have a low probability of occurrence but a strong negative impact. For incidents related to IT as well as physical security,
continuity scenarios and specific action-plans were outlined. A special function for co-ordination of business continuity
process has been established and a new framework set up including clear governance with different level managerial
bodies as well as new methodologies for Business Impact Analysis and Risk Analysis. Testing of contingency scenarios
is conducted regularly in all Baltic business units.
For defining capital requirement to cover unexpected losses from operational risk, the Group has decided to implement
the Standardised Approach under Basel 2 capital adequacy rules. The Group has implemented the required methods,
such as loss database, risk self-assessment and business contingency planning. Capital allocation for operational risk is
included in overall capital adequacy ratio. In the case of residual risk, which if realised could cause a large loss, but is
impossible or economically inefficient to diversify internally, the Group uses risk insurance. Loss levels from operational
risk events remained low and within set tolerance in 2007.
Note 49. Geographic Distribution by Counterparties
In millions of euros, Derivative fin. instruments, fin.
Assets Liabilities and shareholders equity Profit before income tax
December 31 commitments and guarantees
2007 2006 2007 2006 2007 2006 2007 2006
Estonia 8,630.8 7,039.9 6,263.5 5,421.4 1,710.2 1,626.6 203.9 173.2
Latvia 6615 5,111.3 2,696.2 2,405.4 1,421.7 970.0 167.2 104.9
Lithuania 6,043.9 4,230.3 4,288.5 3,390.1 1,527.3 1,143.0 144.5 78.5
CIS 1,192.5 841.6 369.0 366.6 142.2 108.6 20.1 -3.4
OECD 3,258.8 2,130.9 11,774.6 7,457.3 3,479.6 5,462.6 – –
Other 85.2 37.8 434.4 351.0 10.4 44.8 – –
Total 25,826.2 19,391.8 25,826.2 19,391.8 8,291.4 9,355.6 535.7 353.2
82
Note 50. Maturity Structure
Other Non-
Under 1…3 3…12 1…2 2…5 Over 5
In millions of euros, December 31 (without financial Total
1 month months months years years years
maturity) assets
2007
Assets
Cash and due from Central Bank 1,551.6 – – – – – – – 1,551.6
Due from other financial institutions 2,203.6 2.7 30.0 – – – – – 2,236.3
Securities 200.3 208.7 204.2 188.1 296.8 106.4 286.7 – 1,491.2
Loans 930.0 1,581.3 3,217.2 2,208.5 3,928.0 8,304.4 – – 20,169.4
- Allowance for credit losses -25.7 -16.4 -32.2 -25.5 -28.5 -28.0 – – -156.3
Tangible and intangible assets – – – – – – – 163.8 163.8
Other assets 225.9 25.2 49.7 11.0 11.7 24.6 – 22.1 370.2
Total assets 5,085.7 1,801.5 3,468.9 2,382.1 4,208.0 8,407.4 286.7 185.9 25,826.2
Liabilities and equity
Due to Central Bank and Government – 0.3 0.6 0.8 0.6 0.1 – – 2.4
Due to other financial institutions 265.0 411.6 2,088.8 1,773.0 5,805.9 682.5 – – 11,026.8
Deposits 8,645.4 837.0 1,158.7 248.6 22.0 1.6 – – 10,913.3
Debt securities issued to the public 2.3 2.1 18.8 813.8 5.7 - – – 842.7
Other liabilities 461.2 115.1 122.5 61.0 94.7 236.9 – 66.3 1,157.7
Total equity – – – – – – – 1,883.3 1,883.3
Total liabilities and equity 9,373.9 1,366.1 3,389.4 2,897.2 5,928.9 921.1 – 1,949.6 25,826.2
Balance sheet maturity gap -4,288.2 435.4 79.5 -515.1 -1,720.9 7,486.3 286.7 -1,763.7 –
Off balance sheet items
Guarantees, letters of credit and undisbursed loans -593.5 -413.6 -1,218.1 -792.7 -407.7 -300.1 – – -3,725.7
Derivatives, assets 709.1 775.5 301.9 1,044.6 32.6 31.4 – – 2,895.1
Derivatives, liabilities -634.1 -804.4 -365.0 -1,096.8 -34.4 -31.4 – – -2,966.1
Off balance sheet maturity gap -518.5 -442.5 -1,281.2 -844.9 -409.5 -300.1 – – -3,796.7
Net maturity gap -4,806.7 -7.1 -1,201.7 -1,360.0 -2,130.4 7,186.2 286.7 -1,763.7 -3,796.7
2006
Assets
Cash and due from Central Bank 1,540.8 – – – – – – – 1,540.8
Due from other financial institutions 1,038.6 447.5 2.5 – – – – – 1,488.6
Securities 172.1 134.7 274.9 65.5 215.4 124.5 146.0 – 1,133.1
Loans 563.7 887.2 2,448.7 1,789.8 3,131.0 6,069.9 – – 14,890.3
- Allowance for credit losses -14.9 -9.4 -21.5 -16.6 -25.0 -20.6 – – -108.0
Tangible and intangible assets – – – – – – – 143.5 143.5
Other assets 165.1 49.3 36.2 4.4 4.0 9.7 – 34.8 303.5
Total assets 3,465.4 1,509.3 2,740.8 1,843.1 3,325.4 6,183.5 146.0 178.3 19,391.8
Liabilities and equity
Due to Central Bank and Government 0.7 0.4 1.6 1.2 1.1 0.2 – – 5.2
Due to other financial institutions 201.6 474.7 1,020.7 1,204.3 3,210.2 634.3 – – 6,745.8
Deposits 7,781.0 498.5 920.6 107.8 21.3 1.0 – – 9,330.2
Debt securities issued to the public 49.6 38.5 68.5 14.0 822.4 2.6 – – 995.6
Other liabilities 425.8 109.6 71.5 34.7 56.7 175.0 – 31.0 904.3
Total equity – – – – – – – 1,410.7 1,410.7
Total liabilities and equity 8,458.7 1,121.7 2,082.9 1,362.0 4,111.7 813.1 – 1,441.7 19,391.8
Balance sheet maturity gap -4,993.3 387.6 657.9 481.1 -786.3 5,370.4 146.0 -1,263.4 –
Off balance sheet items
Guarantees, letters of credit and undisbursed loans -357.2 -377.6 -1,104.3 -601.8 -270.9 -291.8 – – -3,003.6
Derivatives, assets 731.3 546.4 159.0 53.1 30.3 1.4 – – 1,521.5
Derivatives, liabilities -4,063.3 -533.6 -179.8 -44.1 -9.7 – – – -4,830.5
Off balance sheet maturity gap -3,689.2 -364.8 -1,125.1 -592.8 -250.3 -290.4 – – -6,312.6
Net maturity gap -8,682.5 22.8 -467.2 -111.7 -1,036.6 5,080.0 146.0 -1,263.4 -6,312.6
83
Note 51. Interest Repricing Periods
Non- Non-
Under 1…3 3…12 1…2 2…5 Over 5
In millions of euros, December 31 interest financial Total
1 month months months years years years
bearing assets
2007
Assets
Cash and due from Central Bank 1,551.6 – – – – – – – 1,551.6
Due from other financial institutions 1,887.7 341.3 7.3 – – – – – 2,236.3
Securities 341.1 364.5 126.1 59.0 207.6 106.2 286.7 – 1,491.2
Loans 4,397.1 6,865.1 6,109.2 566.0 1,956.6 275.4 – – 20,169.4
- Allowance for credit losses -41.9 -45.0 -44.0 -8.9 -11.9 -4.6 – – -156.3
Tangible and intangible assets – – – – – – – 163.8 163.8
Other assets 224.7 25.4 50.6 11.1 11.7 24.6 – 22.1 370.2
Total assets 8,360.3 7,551.3 6,249.2 627.2 2,164.0 401.6 286.7 185.9 25,826.2
Liabilities and equity
Due to Central Bank and Government 0.1 0.3 0.8 0.7 0.4 0.1 – – 2.4
Due to other financial institutions 1,314.1 3,903.4 3,187.7 795.2 1,765.1 61.3 – – 11,026.8
Deposits 8,684.1 792.7 1,167.1 245.9 21.9 1.6 – – 10,913.3
Debt securities issued to the public 752.3 12.1 10.2 62.4 5.7 – – – 842.7
Other liabilities 471.2 114.6 124.7 61.8 97.6 221.5 – 66.3 1,157.7
Total equity – – – – – – – 1,883.3 1,883.3
Total liabilities and equity 11,221.8 4,823.1 4,490.5 1,166.0 1,890.7 284.5 – 1,949.6 25,826.2
Balance sheet interest sensitivity gap -2,861.5 2,728.2 1,758.7 -538.8 273.3 117.1 286.7 -1,763.7 –
Off balance sheet interest sensitivity gap -1.6 -0.4 -21.0 -25.9 -2.9 – – – -51.8
2006
Assets
Cash and due from Central Bank 1,540.8 – – – – – – – 1,540.8
Due from other financial institutions 857.6 629.7 1.3 – – – – – 1,488.6
Securities 173.8 178.7 260.2 47.7 199.7 127.0 146.0 – 1,133.1
Loans 3,133.9 5,025.8 5,267.4 414.5 651.8 396.9 – – 14,890.3
- Allowance for credit losses -23.5 -31.7 -33.1 -8.0 -9.0 -2.7 – – -108.0
Tangible and intangible assets – – – – – – – 143.6 143.6
Other assets 165.1 49.3 36.2 4.4 4.0 9.7 – 34.7 303.4
Total assets 5,847.7 5,851.8 5,532.0 458.6 846.5 530.9 146.0 178.3 19,391.8
Liabilities and equity
Due to Central Bank and Government 0.7 0.4 1.6 1.2 1.1 0.2 – – 5.2
Due to other financial institutions 706.8 3,351.9 1,570.1 343.1 696.5 77.4 – – 6,745.8
Deposits 7,807.0 469.2 925.4 106.4 21.2 1.0 – – 9,330.2
Debt securities issued to the public 800.1 99.1 24.4 7.3 64.7 – – – 995.6
Other liabilities 425.8 109.7 71.4 34.7 56.7 175.0 – 31.0 904.3
Total equity – – – – – – – 1,410.7 1,410.7
Total liabilities and equity 9,740.4 4,030.3 2,592.9 492.7 840.2 253.6 – 1,441.7 19,391.8
Balance sheet interest sensitivity gap -3,892.7 1,821.5 2,939.1 -34.1 6.3 277.3 146.0 -1,263.4 –
Off balance sheet interest sensitivity gap – – -0.1 – -2.8 – – – -2.9
84
Note 52. Open Currency Positions
In millions of euros, December 31 EEK LVL LTL EURO USD Others Total
2007
Assets
Cash and due from Central Bank 583.2 491.0 370.8 38.8 11.6 56.2 1,551.6
Due from other financial institutions 36.9 93.3 5.5 1,375.5 565.0 160.1 2,236.3
Securities 106.0 19.9 99.7 1,129.6 123.4 12.6 1,491.2
Loans 1,106.8 715.2 1 729.4 15,481.2 963.9 172.9 20,169.4
- Allowance for credit losses -13.8 -11.6 -18.3 -100.1 -9.2 -3.3 -156.3
Tangible and intangible assets 50.9 50.3 58.3 0.4 – 3.9 163.8
Other assets 80.0 17.3 36.0 190.3 14.1 32.5 370.2
Total assets 1,950.0 1,375.4 2,281.4 18,115.7 1,668.8 434.9 25 826.2
Liabilities
Due to Central Bank and Government 1.4 – 1.0 – – – 2.4
Due to other financial institutions 29.3 72.6 31.9 10,135.4 671.1 86.5 11,026.8
Deposits 2,933.0 1,118.8 2,904.1 2,859.4 956.7 141.3 10,913.3
Debt securities issued to the public 0.5 – – 839.5 2.7 – 842.7
Other liabilities 226.4 111.8 275.5 380.1 98.9 65.0 1,157.7
Total liabilities 3,190.6 1,303.2 3,212.5 14,214.4 1,729.4 292.8 23,942.9
Total equity 1,883.3 – – – – – 1,883.3
Net balance sheet position -3,123.9 72.2 -931.1 3,901.3 -60.6 142.1 0.0
Off balance sheet net notional position 456.2 284.7 186.3 -963.6 73.3 -26.1 10.8
2006
Assets
Cash and due from Central Bank 713.3 513.2 249.9 28.0 12.5 23.9 1,540.8
Due from other financial institutions 25.6 50.5 21.1 882.9 350.1 158.4 1,488.6
Securities 123.3 11.0 97.4 736.3 124.8 40.3 1,133.1
Loans 796.6 918.7 1,362.6 10,935.6 821.8 55.0 14,890.3
- Allowance for credit losses -9.2 -10.8 -14.5 -64.5 -6.9 -2.1 -108.0
Tangible and intangible assets 44.6 44.4 52.7 – – 1.8 143.5
Other assets 66.6 21.6 29.6 142.9 9.0 33.8 303.5
Total assets 1,760.8 1,548.6 1,798.8 12,661.2 1,311.3 311.1 19,391.8
Liabilities
Due to Central Bank and Government 3.0 0.4 1.7 0.1 – – 5.2
Due to other financial institutions 13.8 22.1 48.1 6,154.1 476.3 31.4 6,745.8
Deposits 2,943.9 1,152.9 2,417.6 1,773.1 898.5 144.2 9,330.2
Debt securities issued to the public 19.3 2.3 2.3 938.0 0.5 33.2 995.6
Other liabilities 190.1 85.7 183.9 294.0 95.5 55.1 904.3
Total liabilities 3,170.1 1,263.4 2,653.6 9,159.3 1,470.8 263.9 17,981.1
Total equity 1,410.7 – – – – – 1,410.7
Net balance sheet position -2,820.0 285.2 -854.8 3,501.9 -159.5 47.2 –
Off balance sheet net notional position 2,549.2 -217.0 767.5 -3,284.7 145.2 38.0 -1.8
85
Note 53. Geographic Region Analysis
In millions of euros Estonia Latvia Lithuania Russia Other Eliminations & GT Group
2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006
Total income from
external customers
385.1 304.4 293.9 198.5 270.9 173.8 63.6 42.8 – -0.1 -10.9 -6.1 1 002,6 713,3
Total income from
internal customers
12.2 28.0 3.9 -11.4 -6.0 -2.8 -10.1 -13.8 – – – – – –
Total income 397.3 332.4 297.8 187.1 264.9 171.0 53.5 29.0 – -0.1 -10.9 -6.1 1 002,6 713,3
Profit from associated
companies
0.7 0.7 – – – – – – – – – – 0,7 0,7
Profit before tax 225.3 175.9 157.6 101.9 137.0 75.2 23.5 3.4 0.2 0.3 -7.9 -3.5 535,7 353,2
Income tax – – -23.8 -13.1 -25.0 -13.5 -3.4 -3.1 – – – – -52,2 -29,7
Net profit 225.3 175.9 133.8 88.8 112.0 61.7 20.1 0.3 0.2 0.3 -7.9 -3.5 483,5 323,5
Segment assets 10,336.9 8,104.0 7,261.1 5,511.0 7,278.1 5,087.1 1,260.9 884.6 0.1 0.2 -311.1 -195.1 25 826,0 19 391,8
Segment liabilities 9,669.4 7,563.3 6,785.5 5,169.1 6,871.0 4,809.1 1,168.1 817.7 – 0.1 -553.9 -380.7 23 940,1 17 978,6
Unallocated liabilities – – 2.1 1.9 0.6 0.6 – – – – – – 2,7 2,5
Total liabilities 9,669.4 7,563.3 6,787.6 5,171.0 6,871.6 4,809.7 1,168.1 817.7 – 0.1 -553.9 -380.7 23 942,8 17 981,1
Capital expenditure
(incl. intangible, excl. goodwill)
19.4 12.8 13.6 7.6 13.3 7.9 1.4 1.2 – – – – 47,7 29,5
Depreciation 7.7 6.2 6.1 5.2 4.8 5.1 0.6 0.4 – – – – 19,2 16,9
Amortisation 1.2 0.9 0.1 0.1 0.1 0.1 – – – – – – 1,4 1,1
Provisions 25.2 13.9 26.4 12.4 10.0 12.2 5.4 3.7 – – – – 67,0 42,2
Unrealised (profit)/loss 2.8 4.1 5.9 3.4 -2.4 0.5 1.6 -0.1 – – – – 7,9 7,9
Vacation reserve 0.6 0.4 0.5 0.6 3.9 3.0 – – – – – – 5,0 4,0
No of employees,
3,246 2,940 2,577 2,247 3,380 3,027 371 233 – 2 – – 9 574 8 449
end of period**
Note 54. Segment Reporting
In millions of euros, for the year 2007 share 2006 share 2005 share
Revenues by Business Segments
Banking 874.3 87.2% 610.9 85.6% 422.0 80.4%
Leasing 135.5 13.5% 112.1 15.7% 104.4 19.9%
Insurance 24.4 2.4% 12.7 1.8% 9.2 1.8%
Other 13.1 1.3% 9.6 1.3% 9.2 1.8%
Eliminations -44.7 -4.5% -32.0 -4.5% -20.2 -3.9%
Total income 1,002.6 100% 713.3 100% 524.6 100%
Net Profit by Business Segments
Banking 390.0 80.7% 269.3 83.2% 177.4 73.4%
Leasing 77.8 16.1% 47.5 14.7% 59.3 24.5%
Insurance 16.1 3.3% 7.2 2.2% 5.5 2.3%
Other -0.4 -0.1% -0.5 -0.2% -0.4 -0.2%
Total net profit 483.5 100% 323.5 100% 241.8 100%
Assets by Business Segments
Banking 22,628.1 87.6% 17,236.5 88.9% 12,152.8 95.4%
Leasing 4,278.0 16.6% 3,304.3 17.0% 2,628.1 20.6%
Insurance 454.2 1.8% 311.1 1.6% 218.8 1.7%
Other 53.1 0.2% 42.7 0.2% 38.3 0.3%
Eliminations -1,587.2 -6.1% -1,502.8 -7.7% -2,297.6 -18.0%
Total assets 25,826.2 100% 19,391.8 100% 12,740.4 100%
86
Note 55. Related Parties
Information about Associates
In millions of euros AS Pankade Kaardikeskus AS Sertifitseerimiskeskus Tietenator Support OÜ
Proportion of interest / voting power held 48% 25% 20%
Country of incorporation Estonia Estonia Estonia
Principal activity card payments sertiﬁcation IT
Carrying value 1 January 2006 1.7 – –
Acquisitions (at cost) – 0.5 –
Share of profit, net of dividends received 0.8 – –
Carrying value 31 December 2006 2.5 0.5 –
Acquisitions (at cost) – – –
Share of profit, net of dividends received 0.8 -0.1 –
Carrying value 31 December 2007 3.3 0.4 –
Financial position of associates:
Total assets 7.0 1.9 0.4
Total liabilities 0.2 0.3 0.4
Net assets 6.8 1.6 –
Group’s share of associates’ net assets 3.3 0.4 –
Deposits of the Related Parties
In millions of euros, December 31 2007 2006
Balance Interest range Balance Interest range
Members of the Council and the Board 1.2 0-3% 0.7 0-3%
Associated companies 1.6 0 1.3 –
Loans to Related Parties
In millions of euros, December 31 2007 2006
Balance Interest range Balance Interest range
Members of the Council and the Board 1.0 variable 0.4 variable
Compensation
In millions of euros, for the year 2007 2006
Salaries to the Board 1.7 1.7
Transactions between Swedbank AB (publ) and Hansabank Group
In millions of euros, for the year 2007 2006
Deposits and loans to Swedbank AB 371.4 129.0
Deposits and loans from Swedbank AB 10,161.0 6,110.0
Accrued interest 82.2 40.1
Interest income from Swedbank AB 48.8 11.0
Interest expense to Swedbank AB 402.9 138.7
87
Independent Auditors’ Report
AS Deloitte Audit Eesti
Roosikrantsi 2
10119 Tallinn, Estonia
Phone: +372 640 6500
Fax: +372 640 6503
www.deloitte.com
INDEPENDENT AUDITOR’S REPORT Reg. code 10687819
To the Shareholder of AS Hansapank:
We have audited the accompanying consolidated annual accounts (page 44 to 87) of AS Hansapank and subsidiaries,
which comprise the balance sheet as at 31 December 2007, and the income statement, statement of changes in equity
and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory
notes.
Management Board’s Responsibility for the Consolidated Annual Accounts
Management Board of AS Hansapank is responsible for the preparation and fair presentation of these consolidated an-
nual accounts in accordance with International Financial Reporting Standards as adopted by the European Union. This
responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair
presentation of consolidated annual accounts that are free from material misstatement, whether due to fraud or error;
selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the
circumstances.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated annual accounts based on our audit. We conducted our
audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical re-
quirements and plan and perform the audit to obtain reasonable assurance whether the consolidated annual accounts
are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
annual accounts. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of
material misstatement of the consolidated annual accounts, whether due to fraud or error. In making those risk assess-
ments, the auditor considers internal control relevant to the group’s preparation and fair presentation of the consolidated
annual accounts in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the group’s internal control. An audit also includes evaluating the appro-
priateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated annual accounts.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated annual accounts present fairly, in all material respects, the financial position of AS Hansa-
pank and subsidiaries as of 31 December 2007, and its financial performance and its cash flows for the year then ended in
accordance with International Financial Reporting Standards as adopted by the European Union
Veiko Hintsov AS Deloitte Audit Eesti
Certified auditor
28 February 2008
Audit . Tax . Consulting . Financial Advisory .
Member of
Deloitte Touche Tohmatsu
88
Recommendation of the Board for Distribution of Proﬁt
AS Hansapank’s Board confirmed the 296,8 million euros net profit of AS Hansapank and the 483.5 million euros net
profit of Hansabank Group. In accordance with the audited financial results, the Board recommends to the annual share-
holders’ meeting that Hansapank Group’s 2007 net profit of 483,503,079 euros and retained earnings from previous
financial periods of 1,131,187,236 euros, all totalling to 1,614,690,315 euros, be distributed as shown below.
In euros
Hansapank Group’s net profit for the financial year of 2007 483,503,079
Retained earnings from previous periods 1,131,187,236
Total retained earnings 1,614,690,315
To be paid as dividends –
Balance of undistributed profit 1,614,690,315
Erkki Raasuke
Chairman of the Board
89
Declaration of Management Board
The Management Board has prepared the management report and the annual accounts
of AS Hansapank for the financial year ended on 31 December 2007.
The report has been prepared in accordance with the International Financial Reporting
Standards and presents a true and fair view of AS Hansapank’s financial position, the
results of its operations and cash flows. The Managment Board considers AS Hansa-
pank as operating on a going concern basis. The information presented in the report
is truthful and complete.
Erkki Raasuke
Chairman of the Board
Aivo Adamson
Member of the Board
Maris Avotinš
Member of the Board
Antanas Danys
Member of the Board
Giedrius Dusevicius
Member of the Board
Maris Mancinskis
Member of the Board
Kristina Siimar
Member of the Board
Andres Trink
Member of the Board
Priit Põldoja
Vice Chairman of the Board
resigned from Board as of 14 February 2008
90
Declaration of the Supervisory Council
The Management Board has prepared the management report and the annual accounts
of AS Hansapank for the financial year ended 31 December 2007.
The Supervisory Council of AS Hansapank has reviewed the annual report, prepared by
the Management Board, consisting of the management report, the annual accounts, the
Management Board’s proposal for profit distribution and the independent auditors’ re-
port, and has approved the annual report for presentation at the annual shareholders’
meeting. All the members of the Supervisory Council have signed the annual report.
Jan Lidén
Chairman of the Council
Anders Ek
Vice Chairman of the Council
Lennart Lundberg
Member of the Council
resigned from Council as of 1 February 2008
Lars Lundquist
Member of the Council
Annika Wijkström
Member of the Council
91
AS Hansapank Supervisory Council
Jan Lidén
Chairman of the Council of
Hansabank since 12.04.05.
President and CEO of
Swedbank since 2004.
Born 1949.
Other directorships:
Chairman of Swedbank Finans
AB Swedbank Hypotek AB, Visa
EU and of the Swedish Bankers
Association. Board Member of
Visa International, and of
Swedbank Gemensamma
Pensionsstiftelse I and II
(Swedbank Pension Foundations
I and II).
92
Anders Ek Lennart Lundberg Lars Lundquist Annika Wijkström
Vice Chairman of the Council of Member of the Council of Member of Hansabank Council Member of Hansabank Council
Hansabank since 12.04.05, Hansabank since 26.04.01. since 11.11.05. since 11.11.05.
Member of the Council since Senior Vice President of Chief Credit Officer of Swed- Executive Vice President and
19.04.04. Strategic and International bank. Head of Swedbank Markets.
Executive Vice President and Banking of Swedbank.
Head of Strategic and Inter- Born 1953. Born 1951.
national Banking of Swedbank. Born 1947. Other directorships: Other directorships:
Other directorships: Member of the Council of Deputy Board Member of
Born 1948. Member of the Council of Hansabank OAO Swedbank. Swedish Bankers’ Association,
Other directorships: Hansabankas, Member of the Chairman of the Board of First
Member of the Council of OAO Audit Committee of the Council Securities, Member of the
Swedbank, Member of the of Hansabankas, Member of Board of Swedbank Företags-
Board of Swedbank Robur AB the Council of Hansabanka, förmedling AB and Swedbank
and Entercard Holding AB. Member of the Council of Gemensamma Pensionsstif-
Chair of Swedbank (Luxem- OAO Swedbank, Member of the telse I och II (Swedbank Pen-
bourg) S.A, Swedbank Helsinki, Board of Swedbank sion Foundation I and II).
Swedbank Oslo and Swedbank (Luxembourg) S.A.
Copenhagen.
93
AS Hansapank Management Board
Erkki Raasuke Priit Põldoja Aivo Adamson Maris Avotinš Antanas Danys
Chairman of the Board, Vice Chairman of the Board, Member of the Board, Member of the Board, Member of the Board, Head
Group CEO. Managing Director, Estonia. Chief Information Officer. Managing Director, Latvia. of Retail Banking, Lithuania.
Born 1971. Born 1969. Born 1965. Born 1974. Born 1975.
Degree in Economics, Tal- Bachelor of Business and Degree in Accounting and Master of Economics MBA from Vilnius Uni-
linn Technical University. Finance of Mount Saint Financial Analysis from Tal- from the University of versity. Working in Hansa-
Working in Hansabank Mary’s College, Emmits- linn Technical University LatviaWorking in Hansa- bank since 1998. Earlier:
since 1994. Earlier: Manag- burg, MD, U.S.A. and Auditor examination bank since 2000. Earlier: Chief Financial Officer,
ing Director, Estonia. Working in Hansabank accomplished by Minister Chief Risk Officer. Lithuania.
since 1998. Earlier: Head of of Finance in the Council of
Retail Banking, Estonia. Auditory Actions. Working
in Hansabank since 1992.
Earlier: Chief Risk Officer.
94
Giedrius Dusevicius Maris Mancinskis Kristina Siimar Andres Trink
Member of the Board, Member of the Board, Member of the Board, Member of the Board
Managing Director, Lithuania. Managing Director, Russia. Chief Financial Officer. Chief Risk Officer,
Born 1971. Born 1974. Born 1971. Born 1967
Degree in Economics and Finance MBA of Hofstra Master of Economics Degree in Systems Engineering
Degree in the Institute of University and Bachelor of degree from Tallinn from Tallinn Technical University.
International Relations and Science in Economics of Technical University. Working in Hansabank since
Political Sciences in Vilnius University of Latvia. Working in Hansabank since 2006.
University. Working in Hansa- Working in Hansabank since 1994. Earlier: Chief Financial Earlier: Director of Administra-
bank since 1996. Earlier: 1999. Earlier: Head of Officer of Leasing and Factoring, tion Division, Estonia
Head of Leasing and Factoring, Corporate Banking, Latvia. Baltics.
Lithuania.
95
Hansabank Group in
ESTONIA
Liivalaia 8,
15040 Tallinn
Phone: +372 631 0310
Fax: +372 631 0410
SWIFT: HABA EE2X
www.hansa.ee
LATVIA
Balasta dambis 1a,
LV-1048, Riga
Phone: +371 702 4555
Fax: +371 702 4400
SWIFT: HABA LV22
www.hansabanka.lv
LITHUANIA
Savanoriu 19,
LT-03502 Vilnius
Phone: +370 (5) 268 4444
Fax: +370 (5) 213 2431
SWIFT: HABA LT22
www.hansa.lt
RUSSIA
Sadovaya-Spasskaja Str, 24,
107078 Moscow
Phone: +7 (495) 777 6377
Fax: +7 (495)777 6378
www.hansabank.ru